The strong demand for government wheat in India is primarily due to the higher prices of wheat in the open market compared to the minimum support price (MSP) and the slow arrival of goods in wholesale markets in major wheat-producing states.

As a result, flour millers and processors are increasingly relying on government-supplied wheat through the Open Market Sale Scheme (OMSS).

In the latest OMSS auction held on December 26, 2024, the Food Corporation of India (FCI) offered 100,000 tonnes of wheat for sale, and nearly all of it (99,465 tonnes) was purchased by millers and processors.

This trend has been consistent in previous auctions, with almost 98-99% of the wheat offered being bought. The FCI has been holding weekly e-auctions for wheat in 23 states and union territories across India, and these auctions have proven to be highly successful, with full or near-full purchases in most cases.

The government has allocated a total of 25 lakh tonnes of wheat to the FCI for these weekly auctions, which are set to continue until March 2025.

The sale quantity for each state is determined by the FCI, with prices set at Rs 2325 per quintal for general quality wheat and Rs 2300 per quintal for URS (Unrestricted) category wheat.

The reserve price varies depending on factors like transportation costs and market taxes in different regions.

The strong interest from millers and processors highlights a shortage of wheat stocks in the open market and an increased dependence on cheaper government wheat.

In particular, the fact that 100% of the wheat offered in 14 states was purchased in the December 26 auction indicates that these millers are actively seeking cost-effective solutions in a context of rising wheat prices and limited supply.