Open market sale price for grain reduced

Following the lukewarm response to its Open Market Sale Scheme (OMSS), which is meant to offload excess grain stocks held with the Food Corporation of India (FCI) and state agencies to bulk buyers and small traders, the government has decided to reduce the price of grain offered under the scheme.

Henceforth the government would sell grain, mainly rice and wheat, to bulk buyers at a price calculated on the basis of purchase price for the FCI (the minimum support price offered to farmers) and half of the cost of freight from Ludhiana to the purchasing locations.

Earlier, the OMSS prices included the cost of purchase for the FCI and actual freight cost from Ludhiana. “Because of bumper production and sufficient stocks with FCI, the market price for all grain is below the OMSS price, leading to a lower offtake under the scheme,” said an FCI official.

Under OMSS, the government had allocated 1.2 million tonne wheat to bulk buyers such as floor millers during April-September this year. However, it could sell only 60,881 tonne till now and since last August, there are hardly any buyers for OMSS wheat.

“We will offer a lower rate for wheat under OMSS and an empowered group of ministers (EGoM) would decide the price during the next few weeks,” KV Thomas, Union food minister, had told FE in September.

“At present, while wheat under OMSS is offered at R1,158 per quintal, the prevailing market price is well below the price offered under the government scheme,” said a Delhi-based trader.

The extra allocation of wheat under OMSS to states for retail distribution has also not taken off. Against the allocations of close to one million tonne wheat during April-September 2011, states have lifted only 82,677 tonne.

According to the latest stock position with FCI and state agencies at the start of this month, the government has total grain stocks of 51.7 million tonne against the buffer stock and strategic reserves norm of 21.2 million tonne. The FCI and state agencies have a wheat stock of 20.3 million tonne and rice stock of 31.4 million tonne.

OMSS was launched in 2008-09 to sell excess wheat stocks in the open market. However, it has mostly failed to attract a large number of buyers due to the high price offered when compared to the market price.

In a bid to cut down on the cost involved in physical tendering, the FCI has been using the National Spot Exchange Limited platform to sell wheat under to bulk buyers under the scheme.

According to an FCI official, e-auctioning, besides reducing transaction cost, ensures quick settlement of payment and delivery, in turn leading to better price discovery. (Financial Express).