Poor infra hits open market foodgrains sale to states

The lack of storage facility in states is hampering the offtake of rice and wheat allocated under the open market sale scheme (OMSS). The Centre has been asking states to lift foodgrains allocated under the OMSS to curb rising prices, but the response has not been satisfactory.

Sources told FE that of the total allocation of 1 million tone of rice under OMSS to states during October 2009?March 2010; only 4.4 lakh tonne has been lifted by the states so far. Similarly, of 2-million-tonne allocation of wheat, only 3 lakh tonne has been sold to the states.

Under the OMSS, the government intends to sell 3 million tonne of wheat and rice to the states from its excess stocks to bring prices down. This allocation was above those under the targeted public distribution system.

?Due to infrastructure constraints, states have been slow in buying wheat and rice under the OMSS,? sources said.

Prime Minister Manmohan Singh, while addressing the chief ministers in a recent conference on price rise, had said ?lifting of wheat and rice by the state governments under the OMSS has not been encouraging in most states?.

For rice under the OMSS, the Centre had offered two varieties? common raw rice and raw rice grade A. In Delhi, rice is being sold at Rs 1,569 per quintal and Rs 1,592 per quintal respectively.

?States were asked to sell the rice around Rs 200 per quintal above the offer price,? sources said

Though, OMSS for states has not been much of a success till now, the government?s move to sell excess wheat stocks through tendering for reducing retail price of wheat and wheat flour has evoked good response.

Till now, of the total approved sale of 9.89 million tonne of wheat, 8.72 lakh has already been lifted. The government could sell only about 50,000 tonne of wheat to bulk buyers since its launch in October 2008.

In November last year, the pricing worked out for sale of wheat under the OMSS by a high-level committee of officials from the food and commerce affairs ministries included cost of purchase (minimum support price) by the FCI along with additional carry forward, storage and freight costs.

However, not many bulk consumers came forward to purchase wheat from the Central government, as the sale price was higher than the prevailing market price.

Subsequently, an empowered group of ministers (eGoM) had to reduce the offer price of wheat by around Rs 200 per quintal last month.

The sale price of wheat, at present, includes FCI wheat procurement cost in 2008-09 and freight from Ludhiana. The government has about 20 million tonne of wheat and about 10 million tonne of rice as stocks which is far above strategic reserve and buffer norms.