Explainer: Why government has tightened wheat stock limit
In a major decision aimed at controlling prices, the government on Wednesday lowered the limit of wheat stocks that traders and millers can hold to manage overall food security, prevent hoarding and unscrupulous speculation.
A close watch is being kept on prices of wheat and appropriate interventions are taken to ensure price stability for the consumers in the country, the Centre stated.
What further cuts mean
The stock limit is applicable to traders/wholesalers, retailers, big chain retailers and processors in all states and Union Territories. Traders can now hold only 1,000 tonnes of wheat against 2,000 tonnes earlier. Retailers can hold 5 tonnes against 10 tonnes earlier.
Big chain retailers can hold 5 tonnes for each outlet subject to maximum quantity of (5 multiplied by total number of outlets) stock at all their outlets and depots put together. Earlier it was 10 tonnes and 10 times the total number of outlets. The government also tightened stock-holding limits for wheat processors.
They will now be allowed to maintain 50% instead of 60 % of their monthly installed capacity multiplied by the remaining months till April 2025. All wheat stocking entities will register on the wheat stock limit portal and update their position every Friday. Anyone found to have not registered on the portal or violated stock limits will be subject to suitable punitive action under Section 6 and 7 of Essential Commodities Act, 1955.
In case the stocks held by above entities are higher than the above prescribed limit, they will have to bring the same to the prescribed stock limits within 15 days of issue of the notification.
Why new cuts
Wheat prices in India, particularly in the South, hit a record high of Rs 34,000 a ton in November, according to reports. This, experts said, was due to strong demand, limited supplies and a delay in the government releasing stocks from warehouses to augment supplies.
The stock limits on wheat were first imposed on June 24 and later revised to tighten the norms on September 9. The government also announced that it would sell 2.5 million tonnes from its stock to bulk buyers such as flour millers and processors through weekly e-auctions under the open market sale scheme till March 2025.
The move today is specifically aimed to address the possibility of rise in prices in the coming months considered “lean” in terms of supplies.
Experts say the new season's crop is not expected to reach the market until March-April and prices are expected to stabilise around Rs 29-30/kg in coming months or till the new harvests arrive.
Changing trends
While rice consumption per person per month has fallen, including in rice-consuming regions, wheat consumption has risen, especially in rural areas. Assuring ample availability of wheat in the country, the government says total production of 1132 LMT of wheat was recorded during Rabi 2024.
The FCI, at present, has 222.64 lakh tones of wheat stock, much higher than the buffer norm for January 1. Driven by a jump in vegetable price, India's retail inflation surged to a 14-month high in October. The annual retail inflation of 6.21% in October breached the central bank's tolerance band for the first time in more than a year, as per reports.
With core and food price indices remaining closely linked, a new study suggests that inflation in India is unlikely to ease quickly. While food and vegetable prices are at cyclical highs, the supply response may lag the demand boost from income-transfer schemes, contributing to sustained inflationary pressures,” say reports quoting the Axis Bank’s ‘India Economic and Market Outlook 2025'.
