Amid fears of a drop in paddy production, the food ministry has convened a meeting of 25 producing states and Union territories (UTs) on August 30, to set a target for the procurement of the key grain for the next marketing year (2022-23) starting October 1.
Areas under the paddy crop has dropped 12% so far this kharif season from a year before, mainly due to severe deficiency in monsoon showers in Uttar Pradesh, Bihar and West Bengal. In fact, in the biggest producing state of West Bengal, which makes up about 13-14% of the country’s output, the sowing is down 31% from a year before.
Consequently, trade estimates suggest a drop of 10 million tonne (mt) in the country’s rice production in 2022-23, from a record 129 mt in 2021-22. This may drive up the grain’s prices in the market beyond the state-fixed minimum support price (MSP) and ultimately drag down the government’s rice procurement, as official agencies procure only at the MSP.
Sources told FE that states are expected to provide production estimates as well, based on the sowing of the key grain crop.
Good procurement of rice is essential in 2022-23 to keep inflation in cereals under control, as wheat prices have witnessed a rise in recent weeks despite a ban on exports.
States such as Punjab, Haryana, Chhattisgarh, Odisha, Telangana and Andhra Pradesh contribute significantly to the central rice pool, which is used for supplying grain to beneficiaries under the National Food Security Act and the free ration scheme. The rice procured from grain-surplus states is also used for keeping a buffer stock with the state-run Food Corporation of India (FCI).
The FCI, in collaboration with state government agencies, will purchase the common varieties of paddy from farmers by paying the MSP of `2,040/a quintal for 2022-23. Subsequently, procured paddy is handled over to millers for conversion into rice.
As of August 1 this season (2021-22), the FCI has procured more than 59 mt of rice, and the overall procurement is expected to exceed 60 mt by the end of September, little changed from a record 60.2 mt in 2020-21.
Rice stocks as of August 1, 2022, with the FCI were at 27.9 mt. This stock excludes 13 mt of rice yet to be received from millers. Current rice stocks far exceed buffer stock norms.
There are also concerns about a possible flare-up in prices of rice if kharif production declines, as the season accounts for around 80% of the country’s rice output. This could have ramifications for already-elevated food inflation, which has shown some signs of easing of late, thanks to cooling global prices of edible oils and cereals.