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Foodgrain Management in India

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The main elements of the Government’s food management policy are procurement, storage and movement of foodgrains, public distribution and maintenance of buffer stocks.

The foodgrain management policy in India is detailed in the Targeted Public Distribution System (TPDS) (Control) Order, 2015 notified on 20.03.2015.

Procurement and storage

Procurement operations are seasonal - Kharif Marketing Season (KMS) starts from 1st October and lasts upto 30 September next year. Paddy/ Rice and coarse grains like jowar, bajra, ragi & maize are procured during the KMS. The Rabi Marketing Season (RMS) starts from 1 April and lasts upto 31 March next year. Mostly, wheat and sometimes barley is procured during RMS. [The kharif cropping season is from July –October during the south-west monsoon and the Rabi cropping season is from October-March (winter).]

Before the start of every marketing season, Department of Food and Public Distribution convenes a meeting of State Food Secretaries to make advance arrangements for procurement of foodgrains/coarse grains. In this meeting, issues like procurement centres to be opened by Food Corporation of India (FCI) /State Agencies, arrangement of storage space, evacuation plan for foodgrains and arrangement of packaging material are discussed. Based on the estimates given by the State Food Secretaries, the targets of total procurement for the Central Pool are worked out in the meeting.

Under the existing procurement policy of the Government of India (GOI) / Union /Central Government, foodgrains for the Central Pool are procured by various agencies such as FCI, State Government Agencies (SGAs) and private rice millers . Before the start of each procurement season, Govt. of India announces uniform specification for quality of wheat, paddy, rice and coarse grains. Quality Control Division of FCI ensures procurement of foodgrains from procurement centres strictly in accordance with Govt. of India's uniform quality specifications. Procurement of wheat and paddy for the Central Pool is carried out on open ended basis (i.e., accepting all the grains that are sold to it by farmers) at the declared Minimum Support Price (MSP) fixed by the GOI. In addition, Sates/ Union Territories (UTs) which are presently under Decentralised Procurement (DCP) scheme also procure foodgrains for the Central Pool, but directly store and distribute them under Targeted Public Distribution System [TPDS] and Other Welfare Schemes (OWS) based on the allocation made by the GOI. Any surplus stock over their requirement is taken over by FCI and in case of any shortfall in procurement against allocation made by the GOI, FCI meets the deficit out of the Central Pool.

In order to give relief to the farmers affected by the unprecedented rains & hailstorms, Central Government may (This was done, for instance, in 2015 for wheat procurement) relax quality norms for the procurement and also reimburse the amount of value cut on such relaxation to the States so that farmers get full Minimum Support Price (MSP).

The procured food grains are taken over from State Government Agencies (SGAs) and private rice millers into the Central Pool by FCI and are moved from the procuring states to the consuming states for distribution to the consumers and for creation of buffer stock in various states. Food grains of the Central Pool are stored by FCI in both its own godowns and at hired godowns in different parts of the country. FCI, if so required, may use warehouse receipts as collateral for financing its operations.

Allocation, Off-take of Foodgrains and Central Issue Prices

The function of distribution of foodgrains to the consumers is carried out by the State Governments through Targeted Public Distribution Scheme [TPDS] and Other Welfare Schemes (OWS). The foodgrains are also disposed off by FCI and State Governments, based on allocation of the GOI through sale under Open Market Sales Scheme (OMSS) [i.e., selling foodgrains at predetermined prices in the open market from time to time to enhance the supply of grains especially during the lean season and thereby to moderate the open market prices especially in the deficit regions. Wheat and Rice are also allocated to State Governments for retail sale through non-PDS Channels under OMSS.].

Allocation of food grains for TPDS is made by the GOI for Below Poverty Line (BPL), Antyodaya Anna Yojana (AAY) and Above Poverty Line (APL) on the basis of 1993-94 poverty estimates of the Planning Commission projected on the population estimates of Registrar General of India as on 1 March 2000 or the number of families actually identified and ration cards issued by the State Governments, whichever is less . Allocation for APL category is made depending upon the availability of stock of food grains in the Central Pool. Allocation policy of various state governments under various schemes (both central government schemes and state specific schemes) may be seen here.

Based on the allocation made by the GOI, State Governments lift (off-take) the food grains from the Central Pool for distribution to the consumers through TPDS and OWS. Distribution of food grains for BPL, AAY and APL is carried out by the State Governments through TPDS, with a network of many Fair Price Shops (FPS) spread throughout the country. The State Governments are responsible for identification of beneficiaries and issue of ration cards.

Food grains from the Central Pool are issued to States at Central Issue Price (CIP) for distribution under TPDS to serve families of BPL, APL and AAY at rates fixed by the GOI. Ministry of Consumer Affairs, Food &Public Distribution Government of India, fixes the Central Issue Prices (CIP) of wheat and rice which is uniform throughout the country. The CIPs of wheat and rice were last revised by the Ministry for APL, BPL and AAY in July 2002. In the States where National Food Security Act has been implemented w.e.f. 2013, the CIP has been further reduced.

Movement of Food Grains

In order to ensure availability of foodgrains for TPDS and OWS, and to maintain reasonable levels of buffer stocks at various strategic locations throughout the country, FCI undertakes transportation of foodgrain (wheat and rice) from surplus States to the deficit States and also within the States by rail, road and riverine modes. About 90% of all India movement is undertaken by railways and rest by road and waterways. On an average of 25 lakh bags (each one is 50 KG) of foodgrains are transported every day from the procuring areas to the consuming areas, covering an average distance of 1500 Kilometre. All India Movement Plan is prepared on monthly basis at FCI headquarters keeping in view the quantity available in surplus States, quantity required by consuming States, likely procurement in procuring States, vacant storage capacity both in consuming and procuring States, and monthly allocation/off-take. An online tracking system for movement of foodgrains and depot management was launched in March 2016.The system would provide various types of data regarding stock position, movement, quality and quantity on line. It would also generate SMS alerts to depot officials, area manager and other decision making authorities. All the data are available on dashboard also for top management to monitor centrally so as to help in automatic reconciliation and generation of MIS reports about foodgrain management.

Buffer Stock Policy of the GOI

The concept of buffer stock was first introduced during the IV Five Year Plan (1969-74).

Buffer stock of food grains in the Central Pool is maintained by the GOI for

(i) meeting the prescribed minimum buffer stock norms for food security,

(ii) monthly release of food grains for supply through TPDS and Other Welfare Schemes,

(iii) meeting emergency situations arising out of unexpected crop failure, natural disasters, etc. and

(iv) price stabilisation or market intervention to augment supply so as to help moderate the open market prices.

The Cabinet Committee on Economic Affairs fixes the quarterly minimum buffer norms i.e as on 1st April, 1st July, 1st October and 1st January of every financial year. In addition to buffer norms, Government of India has prescribed a strategic reserve of 30 lakh tonnes of wheat w.e.f. 01.07.2008 and 20 lakh tonnes of rice w.e.f. 01.01.2009.

Foodgrains stock in the Central Pool consists of stock held by FCI, DCP states and the SGAs for both buffer and operational requirements. While four months requirement of food grains for issue under TPDS and OWS are earmarked as operational stocks, the surplus over that is treated as buffer stock and physically both buffer and operational stocks are merged into one and are not distinguishable. According to the present practice, the GOI treats the food stock over and above the minimum norms as excess stock and liquidates them from time to time through exports, open market sales or additional allocations to states. The buffer stock figures are normally reviewed after every five years.

The total annual stock of foodgrains in the Central Pool is distributed over different quarters of the year depending upon offtake and procurement patterns. The seasonality of production and procurement is thus a decisive factor in determining the minimum norm of food grains stocks required in a particular quarter of the year.

As per the of the High Level Committee on Reorienting the Role and Restructuring of FCI_English.pdf Report of the High level Committee on Reorienting the Role and Restructuring of FCI, during the last five years, on an average, buffer stocks with FCI have been more than double the buffer stocking norms. These excess stocks of the FCI, over and above the stipulated buffer stock norms, lead to inflation in foodgrain prices and also increase the Centre’s fiscal deficit. The report says that some of the reasons for these excess stocks are export bans and open ended procurement with distortions (through bonuses and high statutory levies). An additional key factor as per the report is the lack of a pro-active liquidation policy. The current system of liquidation of excess stocks through Open Market Sale Scheme (Domestic) or in export markets is extremely ad-hoc and slow. The report recommends a transparent liquidation policy that should automatically come into effect whenever FCI is faced with surplus stocks over buffer norms. The report stresses the need for greater flexibility to FCI to operate in Open Market Sale Scheme and export markets whenever needed. For more details on buffer stock please see here.

Open Market Sale Scheme (Domestic)

In addition to maintaining buffer stocks and making a provision for meeting the requirement of the Targeted Public Distribution Scheme and Other Welfare Schemes (OWS), FCI on the instructions from the Government, sells wheat and rice in the open market from time to time to enhance the supply of wheat and rice especially during the lean season and to moderate the open market prices especially in the deficit regions. For transparency in operations, the Corporation has switched over to e- auction for sale under Open Market Sale Scheme (Domestic). The FCI conducts a weekly auction to conduct this scheme in the open market using the platform of commodity bourse NCDEX (National Commodity and Derivatives Exchange Limited). The State Governments/ Union Territory Administrations are also allowed to participate in the e-auction, if they require wheat and rice outside TPDS & OWS.

The present form of OMSS comprises 3 schemes as under:

(i) Sale of wheat to bulk consumers/private traders through e-auction.

(ii) Sale of wheat to bulk consumers/private traders through e-auction by dedicated movement.

(iii) Sale of Raw Rice Grade ‘A’ to bulk consumers/private traders through e-auction.

1. FCI was set up in 1965 (under the Food Corporation Act, 1964) against the backdrop of major shortage of grains, especially wheat, in the country. Agricultural Prices Commission was also created in 1965 to recommend remunerative prices to farmers, and FCI was mandated with three basic objectives: (1) to provide effective price support to farmers; (2) to procure and supply grains to PDS for distributing subsidized staples to economically vulnerable sections of society; and (3) keep a strategic reserve to stabilize markets for basic foodgrains.

2. In a bid to increase reach of minimum support price (MSP) operations to more farmers and increase procurement of paddy, the procurement policy has been modified and private firms have been allowed to procure paddy from farmers in a cluster, identified by the respective state government in the states of Assam, Bihar, Eastern Uttar Pradesh, Jharkhand and West Bengal. These states lack necessary infrastructure and experience in large scale procurement operations and the Food Corporation of India (FCI), too, does not have a robust procurement mechanism which often forces farmers to go for distress sale. Private firms would deliver custom milled rice (CMR) at the FCI or state government-owned agency godowns.

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