Wheat Crisis: Centre to procure half of what it procured last year; stops procurement in Punjab

The Centre announced May 4, 2022, that it would procure only 19.5 million tonnes (MT) of wheat in 2022-23, about 56 per cent less than the target decided for this year.

It also announced that government procurement of wheat in Punjab would stop from May 5. The reason given was the lesser amount of wheat reaching the mandis or wholesale markets.

According to government data, around 16.2 MT of wheat was procured in the country till May 1, of which, 8 MT had been procured from Punjab, where the target set was to procure 13.2 MT.

Sudhanshu Pandey, secretary, Department of Food and Public Distribution, Government of India, said in a conference May 4 that this time, the government procurement of wheat was likely to be less than half of the target for this year.

The reasons behind this were the damage caused to the wheat crop in Punjab, Haryana and Uttar Pradesh due to high temperatures in March and April.

Another reason given by Pandey was farmers selling wheat to private traders in their quest for getting higher prices in Madhya Pradesh, Uttar Pradesh, Rajasthan and Gujarat.

Farmers are selling wheat to traders and exporters in these states at Rs 21-24 per kg, while the minimum support price (MSP) is Rs 20.15.

What about food grains for the poor, as part of the Public Distribution System (PDS)? Pandey said the government had decided to give 5.5 MT of rice instead of wheat under the Pradhan Mantri Garib Kalyan Yojana (PMGKY).

He added that 30.5 MT of wheat would be distributed under the National Food Security Act (NFSA), other welfare schemes and PMGKY this year. This figure was 44.6 MT last year.

Pandey said there were 19 MT of wheat in the central pool April 1, 2022 and that 19.5 MT of wheat would be procured this year. That is, the government will have 38.5 MT of wheat.

Of this, 30.5 MT will be distributed to the poor and needy. Thus, on April 1, 2023, the Food Corporation of India (FCI) will be left with eight MT of wheat.

There should be at least 7.5 MT of wheat in government reserves every April 1, according to official rules.

Pandey said India was expected to produce 111.32 MT of wheat this year according to the Second Advanced Estimate of the Union Ministry of Agriculture and Farmers’ Welfare released in February this year. But now, India will produce an estimated 105 MT of wheat.

The food secretary clarified that the latest situation regarding wheat will not affect exports. He said many countries, including Egypt, had decided to buy wheat from India due to the efforts of the Centre.

Contracts for four MT have been signed so far. Some 1.1 MT of wheat has been exported in April alone, Pandey said. Union Commerce Minister Piyush Goyal had earlier said India’s target was to export 10 MT tonnes of wheat.

Pandey also said there was a surplus of rice in the central pool at the moment. Last year, the government bought 60 MT. The same amount of rice is likely to be purchased this year as well. Some 35 MT of rice is distributed under the NFSA.

Déjà vu?

The circumstances regarding wheat procurement currently are very similar to those experienced in 2006-07, according to agriculture and policy expert, Devinder Sharma.

The government was able to procure very less wheat that year. The situation was so bad that wheat had to be imported and given to the needy via the PDS.

Sharma said there was reduced wheat production this year due to bad weather. Moreover, the government wants to exploit the situation arising out of the Russian invasion of Ukraine and export Indian wheat, which is allowing private traders to buy the crop in large numbers.

If the Centre now procures less wheat, it will have to either buy wheat from the market or import it to feed the poor through PDS. Sharma said the erstwhile United Progressive Alliance government in 2005-06 had allowed private traders to buy wheat from farmers.

These traders bought wheat at high prices from farmers since they did not pay the mandi fee / cess. The farmers did not sell wheat to the government due to which the reserves in the central pool reduced.

The government asked private traders to give their stocks to be used in the PDS, which the traders refused to. Consequently, the government had to import 5.5 MT of wheat at double the MSP.

This also caused wheat prices to skyrocket. The Bharatiya Janata party was then in the opposition and had demanded that the entire episode be subject to an investigation by the Central Bureau of Investigation.

India imported 5.3 MT of wheat in 2006-07 and 1.8 MT of wheat in 2007-08, according to FCI’s records. These are the only two years in the last 20 years when India has had to import wheat. The imports came from Australia, Russia, Canada, Argentina, France, Ukraine, Brazil and Hungary.

Down To Earth also went through parliamentary questions of the time to find out about the prices at which this wheat was bought. On December 12, 2008, then Rajya Sabha Member of Parliament, Hema Malini had asked whether the imported wheat was costlier than the MSP given to farmers, which was Rs 8,500 per tonne at the time?

Akhilesh Prasad Singh, the then minister of State in the Union Ministry of Consumer Affairs, Food and Public Distribution, had answered that the 5.3 MT of wheat imported by India in 2006-07 was priced at Rs 9,300 per tonne.

The wheat imported in 2007-08 was priced at Rs 14,800 per tonne. The MSP that year was Rs 10,000 per tonne.

Another reply by the then-government informs that wheat was initially available to the public at Rs 11 per kilogram. When the government imported stocks, this price declined to Rs 8-9 per kg.

Sharma noted that the government had to stop wheat being exported by private traders in 2007-08 when imports did nothing to solve the shortage problem.

The current circumstances can lead to imports of wheat if status quo prevails. What going into private silos also means prices could rise. The government should hence fix a cap on wheat export, something in the range of 10-12 MT.

This is the final in a 2-part series. Read the first part here

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