India has implemented a reduction in the stock limit for wheat held by traders and millers, as disclosed by the senior-most civil servant in the food ministry on Friday. The objective is to augment the availability of the grain and regulate prices effectively.
Concerns have arisen among Indian authorities regarding the volatility in food prices in anticipation of the upcoming general elections scheduled for May. Given that food prices constitute nearly half of the retail inflation basket, the government is undertaking measures on the supply side to mitigate food inflation.
Sanjeev Chopra, the Secretary at the Ministry of Consumer Affairs, Food and Public Distribution, announced a reduction in the limit for wheat stocks held by traders and wholesalers to 1,000 tonnes, effectively halving the previous threshold. Simultaneously, inventory limits for millers and retailers have also been decreased.
“The idea is there should not be any artificial scarcity… Whatever people are holding has to come out in the market so we have given them 30 days’ time to adapt to the new stock limits. Additional availability will have cooling effect on the prices.”
Additionally, Chopra stated that the government stands ready to release an extra 2.5 million metric tons of wheat into the market if deemed necessary to control prices.
On Friday, the Reserve Bank of India maintained its rates for the fifth consecutive meeting, citing an uncertain inflation outlook fueled by persistent food price increases staying above 6%.
Following a decline in production, India has instituted a ban on the export of wheat and non-basmati rice. Additionally, New Delhi has imposed restrictions on sugar exports this year and, as of Thursday, instructed sugar mills to refrain from using cane juice or syrup for ethanol production.
According to a Reuters poll, it is anticipated that India’s retail inflation increased in November, driven by elevated food prices, following a three-month decline.
In September, India implemented stricter restrictions on the limits for wheat stocks held by millers, traders, and retailers.
The Indian Sugar Mills Association, a prominent trade body, projects a decline of 8% in India’s sugar production to 33.7 million tons during the marketing year 2023/24. This projection is attributed to diminished yields resulting from inadequate and poorly timed rainfall in crucial sugar-producing states.