Height of inefficiency! Govt’s foodgrain stocks 2.7 times the buffer norm

Updated: May 06, 2019 7:00 AM

The government sets the buffer level (including strategic reserves) for each quarter and according to this, the stock on April 1 is supposed to be the lowest among all four quarters.

Hight of inefficiency, foodgrain, foodgrain stocks, buffer norm, economy, newsHight of inefficiency! Govt’s foodgrain stocks 2.7 times the buffer norm, highest in six years

By Prabhudatta Mishra

The absence of a transparent liquidation policy has resulted in India accumulating foodgrains 2.7 times the buffer norm in its official reserves after a gap of six years (see chart). This happens at a time when the farm distress is continuing and there is mounting pressure on the state governments to buy grains at the minimum support prices.

The foodgrains stock in the Central Pool was 56.82 million tonne as of April 1, against the buffer norm of 21.04 million tonne. The reserves include 16.99 million tonne of wheat and 39.83 million tonne of rice (including some paddy stock converted in terms of rice). The government sets the buffer level (including strategic reserves) for each quarter and according to this, the stock on April 1 is supposed to be the lowest among all four quarters.

“This is height of economic inefficiency. Stocks need to be liquidated in the domestic market through open market sales scheme (OMSS) or exported,” said Ashok Gulati, a former chairman of the Commission for Agricultural Costs and Prices (CACP). “Also, in the light of excessive stocks, why do we need to have more production and more procurement?” he asked referring to the record food grain production target for 2019-20 crop year (July-June) fixed by the government. “Food grain management requires massive reforms as recommended by the Shanta Kumar panel report.”

In 2014, the government had set up a high-level committee under Kumar. The panel, among other things, suggested unbundling of the Food Corporation of India (FCI) with a view to improving its operational efficiency and financial management. The panel had recommended liquidation of government’s grain stocks via OMSS or in export markets, whenever stocks go beyond the buffer norm.
“The current system is extremely ad hoc, slow and costs the nation heavily. A transparent liquidation policy is the need of 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,” the committee had said in the report.

Gulati, who was a member of the panel, said: “The suggestion to move towards direct cash transfer and reduce the load on FCI for procurement, stocking and distributing grains remains unfulfilled.”

Wheat procurement for 2019-20, which began from April 1, was 22.97 million tonne as of May 2, down from 27.64 million tonne in the corresponding period last year. The target is to buy 35.7 million tonne this year. On the other hand, rice procurement has already surpassed last year’s total purchase of 38.19 million tonne with five more months still to come before the season ends on September 30. FCI data show that rice procurement was 39.76 million tonne as of May 2, while the government had fixed the target lower at 37 million tonne.

The government had raised the MSPs of wheat, barley, chana, masur and mustard by 2-6% in 2018-19 crop year. For as many as 14 crops in kharif 2018, MSP hikes were in the range of 4-52% in sync with the policy to keep the benchmark rates at 1.5 times of the cost. As mandi prices dipped, farmers wanted to sell their produce to the government agencies to get the assured prices.

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