India: FCI’s New Wheat Tender Norms
FCI Introduces New Norms in First Wheat Tender to Curb Excess Stock
The Food Corporation of India (FCI) is set to conduct its first weekly e-auction on December 4, offering 0.1 million tonnes of wheat under the Open Market Sales Scheme (OMSS). However, newly introduced norms aim to prevent millers holding "excess stock" from participating, sparking discontent among industry stakeholders. Some millers have criticized these measures, calling them a "reward" for private parties who avoided procuring wheat earlier.State-Wise Wheat Allocation Under the Auction
The tender includes allocations to multiple states:- Karnataka, Bihar, Gujarat, Haryana, Rajasthan, Maharashtra: 5,000 tonnes each.
- Uttar Pradesh: 14,000 tonnes.
- Punjab: 12,500 tonnes.
- West Bengal: 7,000 tonnes.
- Assam: 6,500 tonnes.
- Delhi: 5,500 tonnes.
- Madhya Pradesh: 4,000 tonnes.
- Jharkhand and Tamil Nadu: 3,000 tonnes each.
Industry Pushback on New Norms
Under the revised OMSS norms, millers must declare their current wheat stocks and ensure their holdings do not exceed their monthly processing capacity. For instance, a miller with a capacity of 2,500 tonnes per month and current stock of 2,450 tonnes can bid for only 50 tonnes. This move seeks to prevent stockpiling and ensure that wheat reaches genuine processors and end-users rather than traders.A leading industry official voiced concerns, stating, "The government appears to be rewarding those who failed to secure wheat in advance and are now dependent on FCI for their supply needs."
Government’s Perspective
According to government sources, the FCI's wheat stock is limited, and the OMSS program must continue until February 2025. Therefore, allocations are based on state-wise requirements to prevent the misuse of wheat for speculative trading.On November 27, the government announced plans to offload 2.5 million tonnes of wheat in the market through OMSS by March 31, 2025, targeting flour mills, wheat product manufacturers, and end-users. This initiative aims to moderate wheat prices in the open market.
Wheat Price Trends
As of December 1, 2024, the average retail price of wheat was USD 0,39/kg, while wholesale prices averaged USD 0,35/kg. The wholesale price rose, following the OMSS announcement.The reserve prices for wheat under OMSS are set at:
- USD 0,27/kg for fair and average quality (FAQ).
- USD 0,26/kg for under relaxed specifications (URS).
Inflation and Price Moderation
Retail inflation was recorded at 4.4%, while wholesale inflation stood at 6.7% as of December 1, 2024, compared to the same period last year. The OMSS initiative is a key step toward stabilizing wheat prices and ensuring availability during the ongoing season.Conclusion
The government’s introduction of new norms under OMSS reflects its intent to moderate wheat prices while ensuring fair access to millers with genuine processing needs. By preventing stockpiling and speculative trading, FCI aims to ensure smooth supply and stable pricing through March 2025. While the new norms have drawn mixed reactions, they emphasize the government’s focus on balancing availability and affordability for both consumers and processors.Click here to reach our trading platfrom CMBroker
