New govt may revise FCI buffer norms

Written by Sandip Das | New Delhi | Updated: Apr 9 2014, 11:03am hrs
A possible revision in the buffer stock norms for the Food Corporation of India (FCI) is something the new government would look at once it takes charge. Sources told FE that the inability to increase the buffer stock norms, last revised in 2005, has put the spotlight on India's excess public stock holding of grains, which may impact global prices, because a part of this is being exported.

Food ministry officials said a hike in buffer stock norms would help the FCI fix quantum of exports and quantities of excess stocks to be sold to private buyers. It would also strengthen India's argument that it needs such high levels of stocks for food security.

At present, the buffer stock norms are aimed at ensuring grain supply for targeted public distribution system (TPDS), ensure food security during the periods when production declines and stabilize prices during production shortfall through open market sales.

Under the food ministry's proposal being considered by officials of agriculture, finance ministries and the Planning Commission, the buffer stock norm should be revised from 31.9 million tonne (mt) to 53.5 mt for July when the grain stocks are at the highest level.

Higher buffer stocks norms would give us cushion against holding on to higher foodgrain stocks against the requirement at present, besides we can take a call in advance about the quantum of exports and selling excess grains to private traders, an official said.

At the start of the month, FCI had a grain stock comprising rice and wheat in excess of 38 million tonne (mt). However, the actual stock would be more than 48 mt if the unmilled paddy held with the private millers is taken into account. The huge stocks was against the strategic reserve norms of only 21.2 mt.

In the last three years, government agencies have been holding on to grain stocks in excess of around 5055 mt on an average, which is far above requirement. This has forced FCI to export a chunk of wheat stocks and sell grains to private traders for dealing with an acute storage crunch. Developed regions such as the European Union and the US have opposed this stockpiling, which is used by India to supply cheap grains under its food security programme.

However, India has consistently maintained that the issue of food security is non-negotiable.

Need of public stock holding of grains to ensure food security must be respected," commerce minister Anand Sharma had said in Bali WTO meeting last year. India has promised that it would not release the grain into the global market.