Commodity traders wary of building inventory

A sustained fall in prices of farm produce on expectations of a bumper kharif output is hurting farmers nationwide. Traders are not buying even at low prices due to tight liquidity and expectations of even lower prices after the GST is imposed. The government’s decision to place essential food in the “zero” tax GST bracket has brought trade to a standstill. “Uttar Pradesh levies a purchase tax on wheat and Haryana and Jharkhand levy VAT on rice. Gujarat, Maharashtra, Karnataka, Tamil Nadu and Madhya Pradesh levy VAT on oilseeds. Many such commodities fall in the zero-tax GST bracket. Stockists are wary of building inventory on concerns that VAT credit will not be allowed,” said Unupom Kausik, deputy chief executive officer, National Collateral Management Services, a New Delhi-headquartered warehousing company. Consequently, many essential commodities are trading below their minimum support prices (MSPs). Tur, for example, in Amravati (Maharashtra) hit its lowest of Rs 3,725 a quintal last week against its MSP of Rs 5,050 a quintal. Paddy in Abhanpur (Chhattisgarh) slumped to  Rs 1,375 a quintal last week, substantially below its MSP of Rs 1510 a quintal. Other commodities, including cereals, oilseeds and pulses, have faced significant declines in the last few months. Future & Option Trading Tips