India Inc to stay away from wheat mandis

NEW DELHI: Major corporate buyers such as Adani, Noble Grain, AWB and Glencore have decided to exit wheat mandis this year due to government pressure and high political risk. The biggest losers will be India’s 12 million wheat farmers. They will have to depend solely on FCI and small traders for buying their harvest. The other big losers are warehouse owners in the grain belt, who have suddenly run out of deep-pocket tenants.

ITC is expected to buy wheat just enough for its own brand and not for trading with other millers. But most other corporates have decided to give Punjab, Haryana and Uttar Pradesh a wide berth because the FCI will be active in these states.

Companies such as Adani and AWB say have no plans to deal in wheat this year. With no plans to stock wheat either, they have cancelled warehouse bookings in different states. A few companies have even had to write off the booking amounts as a loss.

“The biggest worry is that government may impose stock limits a few months down the line. That would immediately hit any company holding wheat,” said a trader. The exit of corporate players has put paid to the much-publicised National Storage Policy, under which the government had invited companies to invest in warehouses for long-term storage.

“Who wants to invest in warehouses when the government is constantly threatening you with stock limits. It would be foolhardy to invest in this sector,’’ said a Mumbai-based CEO.

For farmers, nothing could be worse. Last year, farmers in UP and Punjab could afford to say no to FCI because they had much better offers for the same grain. So, while the government is worried about supplying food to India’s poorest families, the steps it is taking are simply exacerbating their poverty further by driving away genuine buyers.

“Our focus is Madhya Pradesh and Gujarat. Even if we enter the North, we will stay away from Punjab, Haryana and UP till FCI is present. The last thing we want is a run in with the government,’’ said the CEO of a grain trading company.

Ironically, while political risk has scared off large players, the government on Monday admitted in Parliament that wheat procurement by big private players such as Cargill and ITC did not cause any artificial crisis last year as the quantity they purchased was small in comparison to total production.

“As per feedback received from various agencies, wheat procurement by major private parties such as Cargill, ITC, Glencore, Adani, Reliance and AWB was only 2 million tonnes in rabi marketing season 2006-07,” minister of state for agriculture Md Taslimuddin said.

This quantity was only a small part of the production of 69.35 million tonnes in 2005-06, he said. The minister said as a consequence of deregulation of the agriculture marketing system, farmers now had a choice to sell their produce to prospective buyers to obtain better prices.

nidhi.srinivas@timesgroup.com