Centre puts caps on wheat stock held by traders, import option open

Food inflation has hovered around 8% from a year ago for eight months after extreme weather trimmed output of key crops, hurting households and keeping retail inflation above the central bank’s target of 4%

The Centre on Monday imposed restrictions on the quantity of wheat traders can store to boost supplies and curb high prices that authorities blamed on hoarding rather than shortages or a production shortfall.

Centre puts caps on wheat stock held by traders, import option open

Food inflation has hovered around 8% from a year ago for eight months after extreme weather trimmed output of key crops, hurting households and keeping retail inflation above the central bank’s target of 4%.

The limits on wheat stocks follow similar caps imposed last week on two varieties of pulses: tur (pigeon pea) and chana (chickpea). The stockholding limit on pulses has resulted in an immediate fall in prices by ₹50-200 a quintal (100 kg) in the case of pigeon pea and ₹100-300 a quintal in the case kabuli chana, a chickpea variety, consumer affairs secretary Nidhi Khare said.

The government may invoke more measures to calm prices, including wheat import, food secretary Sanjeev Chopra said on Monday. “Imposing stock limits is just one option. We have many other tools at our disposal to ensure wheat prices remain stable,” he said.

Asked if the government could consider importing wheat, Chopra said: “All options are open and import is one of the options.” He, however, added there was no shortage of wheat in the country.

Although consumer inflation eased to a 12-month low of 4.75% in May from a year ago, food prices remained sticky at 8.69%, driven by cereals and pulses, according to latest official data. Wheat prices were up nearly 6% on year.

“I would like to dispel the notion that there is a wheat shortage. There is no shortage. Vested interests are creating an impression that stocks are low. Traders are holding back on stocks,” Chopra said.

India currently imposes an effective duty (including cess) of 44% on wheat imports. If the government cuts or abolishes duty on wheat shipments, it will pave the way for import of the grain by India for the first time in six years.

Monday’s order states traders and wholesalers will have to bring down wheat stocks to 3,000 tonne within 30 days. Retailers are allowed to hold 10 tonne for each retail outlet, while big chain retailers can also hold only 10 tonne for each outlet and 3,000 tonne at depots. Food processors can stock 70% of their monthly installed capacity multiplied by remaining months of 2024-25, the order said.

The Food Corporation of India, the Centre’s main grain-handling agency, has procured 26.6 million tonnes of winter wheat till June 18. This is lower than the procurement target of 30-31 million tonnes. The government requires 18.4 million tonnes to cater to the public distribution system, under which 800 million people are given free grains, and other food-based welfare schemes.