Why wheat procurement is short of Indian govt target despite good arrivals

Wheat procurement in Punjab and Haryana ended on May 31 and these two States purchased 19.6 million tonnes (mt), which is more than 93 per cent of their combined target of 21 mt. On the other hand, the procurement in Madhya Pradesh, Uttar Pradesh and Rajasthan has been a distant 43 per cent at about 6.9 mt until May 31 against their combined target of 16 mt.

As total procurement in the crucial first two months of the season has reached at 26.51 mt and with no significant improvement expected this month, the government has started finding reasons for this unexpectedly lower procurement.

Though the official “estimate” of wheat procurement was 37.29 mt for this year, the government was hoping to purchase 30-32 mt.

Past record

“When the record procurement of 43.3 mt happened in 2021-22, arrivals at purchase centres were reportedly at 44.4 mt and the government had fixed the procurement target of 44.4 mt for 2022-23. Going by the past record, the procurement should have been higher as the crop was good this year,” said Ankit Jindal, a wheat trader. The arrival was also not that bad either, he said.

According to the Food Ministry, a total of 36.30 mt wheat arrived this season at procurement centres and mandis as per data compiled by all agencies involved in the purchase programme. Haryana has purchased almost the entire wheat that arrived while Punjab has bought 94 per cent of the arrivals for the Central Pool.

On the other hand, only 21 per cent of over 4.4 mt of wheat that arrived in Uttar Pradesh was purchased and it is 50 per cent of arrivals in the case of Madhya Pradesh. Rajasthan was slightly better at 63 per cent of arrivals getting procured by government agencies.

Traders’ appetite

“The government should be more realistic as it should not try to artificially cap wheat prices, which should be allowed to move according to prices of other crops. First, the minimum support price (MSP) got distorted when two States announced bonus. Secondly, after two years of dry runs in open market supplies, there was a big surge in the appetite of the trade and industry which tried to buy as much as possible at whatever rates available,” said a flour miller of a Northern State.

The Centre in 2023-24 sold about 10 mt of wheat in open market from its official reserves through weekly e-auction by fixing a single reserve price (around MSP level) across the country.

Besides, farmers are also getting aware and as they expect prices to go up in winter, a large chunk of those having capacity to store has withheld selling the entire produce, experts said. No one knows when this wheat, currently with farmers, will arrive in the market, experts said.

Though purchases of wheat is scheduled to continue until June 30, it is likely to end before as arrivals have almost dried up. The official procurement period in Uttar Pradesh and Bihar is until June 15 while it is up to June 30 in Madhya Pradesh and Rajasthan.