Why did the govt. impose a ceiling on wheat stocks?

Source: The post is based on the article “Why did the govt. impose a ceiling on wheat stocks?” published in The Hindu on 14th June 2023

What is the News?

The Union Government has imposed limits on the stock of wheat that can be held by traders, wholesalers, retailers, big chain retailers and processors.The objective is to stabilize the price of the essential commodity by steadying supply.

What are the orders issued by the government on wheat stocks?

The government has imposed limits on the stock of wheat that can be held by traders, wholesalers, retailers, big chain retailers and processors.

The mentioned entities are expected to declare their stock positions and update them regularly on the Department of Food and Public Distribution’s portal.

If the stock held by them is higher than the limit, they will have 30 days from the day of issue of notification to bring the same under the prescribed limits.

The government has also decided to offload 15 lakh tonnes of wheat from the central pool via the Open Market Sale Scheme (OMSS) to flour mills, private traders, bulk buyers, and manufacturers of wheat products through e-auction. The idea is to control the retail prices of wheat.

Why has the government issued these orders on wheat stocks?

These orders have been issued in the backdrop of rising concerns about the overall wheat output taking a hit after the unseasonal rains and hailstorms towards the end of March and early April alongside hotter temperatures in February.

Lower production leads to higher prices for the crop. This could in turn create conditions for local prices exceeding the government’s purchase prices and thus, bothering the latter’s endeavour to stock up supplies.