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  FCI wheat price cut won t enthuse auctionEers
http://www.business-standard.com/ 07122010

The price was reduced after a 7% cut in rail freight.

The marginal cut in wheat prices by government-owned Food Corporation of India (FCI) is unlikely to do much for sale of the staple through the open market sale scheme (OMSS).

FCI on Wednesday reduced the base offer price for wheat under OMSS, following a seven per cent reduction in rail freight. The base price for wheat tenders would come down by Rs 2 a quintal in Delhi and by Rs 12-13 in southern states. For instance, wheat will be quoted at Rs 1,389.78 a quintal against Rs 1,402 a quintal in Tamil Nadu.

“There is virtually no cut in prices. The government only reduced the transportation cost,” said Anjani Sinha, MD and CEO of the National Spot Exchange (NSEL).

The new base price is still higher than the current spot market price, of Rs 1,230-1,240 a quintal. Had the government brought it down, either on a par with the spot price or below, a lot of bulk consumer interest could have been generated. Wheat sale through OMSS is a function of price. Otherwise, only those consumers participate in auctions who do not get large quantities of wheat, Sinha added.

The previous wheat sale auction by NSEL through OMSS was in June and it sold 750 tonnes. The earlier restrictions on quantity have been lifted, with monsoon rainfall on and the lack of storage capacity.

The NCDEX Spot Exchange has also been hired by FCI to conduct wheat auctions. It is preparing to do the first one in Andhra Pradesh soon, said Rajesh Kumar Sinha, head of NCDEX Spot.

FCI has 17.8 million tonnes (mt) of wheat, much higher than the buffer norm of 17.1 mt. In addition, the government holds 3 mt as a strategic reserve, according to FCI’s website.


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