Govt to release 7.5 million tonnes of grains to cool prices

The Union government on Wednesday said it will push millions of tonnes of additional cereals from state-held stocks to cool prices, amid stubbornly high food price despite a raft of anti-inflation measures.

The government is already offering cereals through the so-called open-market sales scheme, under which grains are auctioned to private traders to soften prices. While markets have so far bought state-held wheat in sufficient quantities, they have not adequately responded to rice auctions by the government, Union food secretary Sanjeev Chopra said.

The government will therefore release 5 million tonnes of additional wheat and 2.5 million tonnes of rice through further auctions, Chopra said. The government has also decided to reduce the reserve price of rice, from ₹31 a kg to ₹29 a kg, to improve “offtake”, or quantities actually sold, he said.

Cereal inflation has stayed in double-digits for six straight months. High prices of most food items, other than edible oil, have knocked household budgets. Inflation in wheat stood at 12.37% in June, despite a ban on export since May 2022. Rice prices rose by 11.78% in the same month. India banned the export of non-basmati rice on July 20 2023 over inflation worries.

Controlling prices is a top priority for the Modi-led government. High prices pose a challenge to growth and macroeconomic stability. The ruling government also faces a general election in early 2024, aside from a string of upcoming polls in states.

“The idea (of releasing additional grain stocks) is to send a signal (to the markets) and address any doubts about availability of stocks with the government,” the food secretary said.

The fresh allocations, the government hopes, will send strong indications to markets that the Centre’s main grain agency, the Food Corporation of India (FCI), has no dearth of grains and will release more of them to bring prices down. “Prices have not gone down to the level we expected. Those hoarding or holding on to stocks should know that the government will take even more aggressive measures to bring down prices,” Chopra said.

FCI chief Ashok Meena said the government had 8.7 million tonnes of wheat and 20 million tonnes of rice in its reserves, more than sufficient to meet demand.

The government first announced its open-market sale scheme this year for cereals in June, which is an essentially a step to boost supplies. In the first tranche, the government offered 1.5 million tonne of wheat and 500,000 tonne of rice.

The weighted average sale price of wheat under offer has gone up in several rounds of auction, a sign that private traders are buying sufficient quantities. “But the offtake for rice hasn’t been good, that’s why we decided to tweak the reserve price,” Chopra said.