Rising food grain stocks: Govt mulls hike in BPL quotas, open market sale

Topics BPL | Food grain

A labourer sits on sacks of food grains while waiting for customers at a wholesale market in Ahmedabad
With food grain stocks held by state-owned Food Corporation of India (FCI) in the central pool hit a six- year high, the government plans to increase allocations to below-poverty-line (BPL) families and raise the open market sale scheme (OMSS) to liquidate inventory.

Informed sources said that the Union Ministry of Food convened a meeting of all stakeholders, including officials from the Union Ministry of Finance and Union Ministry of Agriculture, to consider options for liquidating food grain stocks, which currently stand at a six-year high if 74 million tonnes, under FCI’s management.

A few participants suggested an increase in allocations by two kg per capita per month for BPL families. Currently, every BPL family member gets seven kg of rice and wheat under the government’s food security mission at a subsidized rate of Rs 2 and Rs 3 a kg, which effectively works out to Rs 5.65 and Rs 4.15 for consumers.

“Apart from increase in allocations for BPL families, the Union Ministry of Food also discussed raising OMSS (Open Market Sale Scheme) sale by three million tonnes to 10 million tonnes,” said a source participated in the meeting.

Data compiled by FCI showed total rice and wheat stocks in its central pool at 27.58 million tonnes and 46.55 million tonnes, respectively, for June 2019. While rice stocks have declined from 29 million tonnes in May, wheat stocks have swollen from 33.16 million tonnes for the same month.

FCI’s total wheat procurement for the 2019 rabi harvesting season stood at 34 million tonnes, as against 35.79 million tonnes in the comparable season previous year. Rice procurement for kharif 2018 was 43.23 million tonnes as against 38.18 million tonnes in the previous season.

An email sent to FCI chairman D V Prasad did not elicit any response.

If approved, the additional quantity allocated to BPL family members would be done through the public distribution system (PDS) on regular basis. This is set to help liquidate additional quantity of three million tonnes. The government currently distributes about 11 million tonnes of food grains a year to some 400 million BPL families. This will go to over 14 million tonnes with the increased allocation.

“Increase in food grain allocation for BPL families would not only increase government’s subsidy burden but would also raise grain availability in the market, possibly causing a fall in prices. So, this proposal would destabilise food grain prices in the open market,” said Sanjay Kaul, Managing Director, National Collateral Management Services (NCML).

The current distribution of grains entails a subsidy burden of about Rs 190,000 crore, and could rise by nearly 25 per cent if the proposals are accepted.

“It will be a herculean task for the government to raise such a large quantum of funds for subsidy for BPL families,” said Kaul.

Apart from that, the Union Food Ministry also discussed increasing foodgrain sales via OMSS by three million tonnes to 10 million tonnes this year, from seven million tonnes last year.

“Both plans under consideration are set to help the Union Food Ministry reduce FCI’s inventory by six million tonnes. Anyway, total availability of food grains for open market sale was very low as FCI procured large quantities this year,” said a senior official of a leading warehousing company in India.

Participants, meanwhile, have urged the government to freeze the minimum support price (MSP) of food grains for few years, as done in the past, to control procurement.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel