In the ongoing Rabi marketing season, Punjab’s grain markets have witnessed a surge in the private purchase of wheat, with private players registering a 47% increase in the purchase of wheat compared to the same period last year. This trend is set to continue till the end of the season. Here is why.
Small fraction of all purchases
Until Wednesday (May 1), Punjab’s grain markets received 109.57 lakh metric tonnes (LMT) of wheat, compared to 113.77 LMT last year on the same date. Out of this, 107.69 LMT has been already purchased — 101.51 LMT by government agencies, and 6.18 LMT by private players like flour millers/processors. Last year, private purchases stood at 4.19 LMT on this date, despite higher quantities of wheat available for purchase overall.
Capacity of private flour mills
At present, there are about 70 roller flour mills in Punjab, with a daily processing capacity of 6,400 tonnes of wheat (although they operate at around 50% capacity). This translates to an annual processing capacity of approximately 12 LMT. Millers primarily focus on supplying atta, sooji, and maida within the state, and to other states.
According to the Punjab Market Board (PMB), Punjab millers procure only 25-30% wheat from within the state. The remaining 70-75% are procured from the Food Corporation of India’s (FCI’s) e-auction under its Open Market Sale Scheme (OMSS), and other states such as Uttar Pradesh and Rajasthan, which supply wheat at a cheaper rate than the FCI.
However, this year, millers have already purchased over 50% of the mills’ total consumption of the grain.
Why private purchases have shot up
Several factors have contributed to this surge, Naresh Ghai, president of the Punjab Rollers Flour Mills Association, told The Indian Express.
“Last year the quota fixed under OMSS was 100 tonnes per week per mill. This was not even one-third of the required weekly consumption for a mill. Later, this quota was increased to 200 tonnes per week — still below what mills needed,” he said.
Ghai also pointed out that prices in Uttar Pradesh and Rajasthan have also shot up — meaning it makes more sense for mills to procure wheat from Punjab itself. “This year, the MSP [Minimum Support Price] in Rajasthan is Rs 2,400 per quintal, including the Rs 125 bonus instituted by the state government over and above the Rs 2,275 national MSP … UP markets also rates are up. This is why millers are purchasing wheat from Punjab’s mandis by offering Rs 5-10 per quintal higher than the MSP,” Ghai said.
Millers like Ghai have long advocated for a transparent government policy regarding the open market sale price of wheat, preferably announced annually on April 1. This would help mitigate risks associated with price fluctuations. The surge in purchase of wheat by private players reflects their attempts to optimise their procurement strategies, and minimise financial risks.