Stocking limits on wheat

Source-This post on Stocking limits on wheat has been created based on the article “Does India really need stocking limits on wheat?” published in “The Indian Express” on 26 June 2024.

UPSC Syllabus-GS Paper-3– Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices; Public Distribution System – Objectives, Functioning, Limitations, Revamping; Issues of Buffer Stocks and Food Security; Technology Missions; Economics of Animal-Rearing.

Context– The article discusses the Indian government’s decision to impose stock limits on wheat, despite record production estimates. It highlights the contradictions between different government actions and raises questions about the actual supply situation.

The Union Agriculture Ministry reports that Indian farmers have harvested a record-breaking wheat crop of 112.93 million tonnes (mt) this year, surpassing last year’s output of 110.55 mt.

The government-imposed stock limits “to manage overall food security and to prevent hoarding and unscrupulous speculation.” Wholesalers and large retailers are restricted to 3,000 tonnes, individual stores to 10 tonnes, and processors to 70% of their installed milling capacity. They must declare and update their stock positions on a government portal.

What are the reasons behind reimposition of stock limits on wheat despite record production?

There are three main reasons for concern: –

A) High retail cereal inflation of 8.69% compared to last year.

B) The lowest wheat stocks in government storage on June 1 in 16 years.

C) A subpar monsoon that could affect rice production despite current adequate stocks.

Read more- Changing Demand for Cereals in India

What are the issues with reimposition of stock limit?

1) There appears to be a contradiction between record-high cereal production estimates and the imposition of export restrictions and domestic stock limits. The administration cannot claim bumper crops through the agriculture ministry while restricting hoarding through food and distribution channels.

2) There is a question about high cereal inflation despite bumper crop production.

3) If production remains robust but inflation persists and exports are restricted, the government should consider removing the 40% duty on wheat imports if it doubts the adequacy of domestic supply.

Question for practice

What are the reasons behind reimposition of stock limits on wheat despite record production?