The recent surge in wheat prices is creating significant challenges for flour millers across India, especially as the prices have reached unprecedented levels. The rapid increase in wheat prices is attributed to limited supply and strong demand in major wholesale markets of key producing states. Despite flour millers paying high prices for wheat, they are still facing difficulties in obtaining sufficient quantities to run their operations at full capacity.
Key factors contributing to this situation include:
Limited Wheat Supply: The arrival of wheat in the markets is insufficient to meet demand, and even at high prices, millers are struggling to secure adequate stock. This has forced many flour mills to operate below their full capacity.
Government Measures Falling Short: Although the Indian government reduced the stock limit for wheat in November 2024, which was expected to increase supply and ease prices, this policy change has had little positive impact. Similarly, the Food Corporation of India's Open Market Sale Scheme (OMSS) initiated in December 2024, which started selling wheat from its stock, has proven inadequate. The fixed weekly quantity of one lakh tonnes is far less than what the mills need to operate at full capacity.
Rising Wheat Prices: Wheat prices in Delhi have soared to approximately Rs 33,000 (around 384.66 dollars) per tonne, up from Rs 24,500 per tonne in April 2024. This is significantly higher than the minimum support price (MSP) of Rs 22,750 per tonne for the 2023-24 season, which suggests that traders and producers are hoarding limited stocks.
Widespread Impact Across Major Wheat-Producing States: Wheat prices are much higher than the MSP not only in Delhi but also in top-producing states like Uttar Pradesh, Madhya Pradesh, Rajasthan, Punjab, Haryana, Bihar, Gujarat, and Maharashtra. This price hike is affecting both producers and consumers.
In conclusion, despite government interventions, the wheat market remains tight, and flour millers are grappling with supply shortages and escalating costs, which threatens their ability to operate efficiently. Analysts are urging the government to release more wheat from its stock to stabilize the market.