The Modi-government has asked states to prepare for the early procurement of wheat as internal food ministry estimates point to stocks plunging to a 16-year low by April 1.

This crisis has profound political implications in the backdrop of the 2024 general election and farmer protests centred on demands to legalise minimum support prices.

According to food ministry estimates, the wheat stock with FCI is likely to fall close to the buffer of 7.4 million tonnes (mt) by April 1 because of aggressive selling in the open market aimed at curbing spikes in prices.

At present, the FCI has a wheat stock of 12.67 mt, the lowest since 2016 against the buffer of 7.4mt for April 1.

According to an assessment, following the offloading of 10mt of wheat in the market, the government stock is likely to fall to around 7.7 – 7.8mt by April 1.

The government has set a higher wheat production target of 114mt for the 2023-24 crop year (July-June) against an estimated output of 110.5mt in 2022-23.

Analysts said despite optimistic production estimates by the agriculture ministry, the Food Corporation of India (FCI) fell short of its procurement targets for wheat. In the 2022-23 crop year, the government procured only 26.2mt against the target of 44mt.

The FCI is likely to continue with the open market sale of wheat to bulk buyers till March 15. In the current fiscal, the corporation has sold 8mt of wheat in the market to bring down prices.

This offtake would surpass the procurement of 26.2mt during the 2023-24 fiscal year.

Analysts pointed out this will not be the first time stocks are close to buffer levels but have greater implications amid an election campaign.

The increase in the authorised capital of state-run Food Corporation of India (FCI) to Rs 21,000 crore from Rs 10,000 crore needs to be seen in that context.

Stocks with the FCI plunged below the buffer of 7.4mt in 2008 at 5.8mt, while in
2017 and 2023, they were marginally higher at 8.06mt and 8.35mt, respectively.

The Modi-government has resorted to a range of measures to control cereal inflation — including banning the exports of wheat and non-basmati white rice; not allowing wholesalers and big chain retailers to hold more than 1,000 tonnes of wheat; and selling grain from FCI’s stocks in the open market.

While these measures should help keep prices under check, especially ahead of Lok Sabha elections, scheduled in April-May, a great deal hinges on the size of the wheat crop to be harvested from March-end.

The policymakers would follow the weather conditions as a spike in temperature in March can impact yields through premature ripening as happened to the 2021-22 crop.

A repeat of that – or even last year’s unseasonal heavy rains in March – could aggravate problems of already-depleted stocks and near double-digit cereal inflation, making imports inevitable.

According to Budget 2024-25, presented in the Lok Sabha by finance minister Nirmala Sitharaman, an amount of Rs 2.05 lakh crore will be earmarked for food subsidy in the next fiscal year. This is lower than the revised estimates of Rs 2.12 lakh crore for the fiscal ending on March 31, 2024. The food subsidy bill was Rs 2.72 lakh crore in 2022-23.