FCI held more food grains than mandated buffer as on April 1

Despite selling more than seven million tonne of excess wheat stocks through the open market sale scheme (OMSS) in FY16, the Food Corporation of India continues to hold more grains than the mandated buffer stock at the start of the current fiscal.

On April 1, food grain stocks, mostly consisting of wheat and rice, held by FCI  stood at 36.69 million tonne (MT), against the buffer norm of 21.04 MT.

The corporation at the start of the month had rice stocks of 22.16 MT, which excludes about 6.7 million tonne of rice yet to be received from millers. As per the stocking norm for April 1, the FCI should have a rice stocks of 13.5 MT.

Similarly, in case of wheat, the corporation has grain stock of 14.5 MT at the start of this month, while the stocking norm stipulates only 7.4 MT of grain to be held with the government agencies. Against the the target of selling around 10 million tonne of wheat to bulk buyers like food companies under OMSS, the FCI had sold more than 7 million tonne by end of March 2016.

The economy cost for wheat for FCI for the current fiscal is fixed at Rs 2,344 per quintal, taking into account the minimum support price, storage and other costs.

The reserve price of wheat was fixed at Rs 1,550 per quintal under the OMSS in Punjab, Haryana and Madhya Pradesh during the previous fiscal. For depots of FCI located outside these states, the reserve price of wheat was fixed at Rs 1,550 per quintal plus railway freight from Ludhiana to the nearest railhead and road transportation cost from such railhead to the depot.

For the rabi market season (2016-17), which officially commenced on April 1, FCI, in collaborations with state government agencies, has commenced purchase of wheat from farmers in the key producing states of Punjab, Haryana, Madhya Pradesh and Rajasthan.

As per the latest data, around 2 MT of wheat has already been purchased from farmers, mostly in Madhya Pradesh and Haryana. The government agencies are aiming at purchasing 30 million tonne of wheat during April-June period.

The high level committee (HLC) set up to recommend restructuring of FCI last year had stated that one of the key challenges for it has been to carry buffer stocks way in excess of norms.

“During the last five years, on an average, buffer stocks with FCI have been more than double the buffer stocking norms costing the nation thousands of crores of rupees loss without any worthwhile purpose being served,” the HLC had noted.

The HLC report also stated that “a transparent liquidation policy is the need of the hour, which should automatically kick in when FCI is faced with surplus stocks than buffer norms. Greater flexibility to FCI with business orientation to operate in OMSS and export markets is needed”.