Bolstering Storage Capacity to Over 100%
India is the third-largest producer and consumer of wheat, behind China and the European Union. The government maintains domestic support programmes for producers and subsidies for the vast majority of consumers. The Food Corporation of India (FCI) procures wheat from producers and maintains government stocks for public distribution programmes. However, Foreign Agricultural Service (FAS) of the United
States Department of Agriculture (USDA) in its February report estimated that India is witnessing historically tight government-held wheat ending stocks as India is coming to the end of wheat marketing year 2023-24 (April 2023-March 2024).
Notably, government-held stocks this January plummeted to the lowest level since 2017. In addition to the higher offtake for food security programmes, the government has been rapidly auctioning stocks to the open market in an effort to quell high cereal price inflation. The 2023-24 ending stocks (as of April 1, 2024) are now forecast at the lowest in 15 years and only slightly above the government’s minimum desired buffer stocks level.
It may be noted ahead of Deepawali in November 2023, the government offloaded
2.5 lakh metric tonnes of wheat at Rs 21.50/ kg for Semi-government and cooperative organisations under Open Market Sale Scheme [OMSS (D)] for converting to flour and offer it for sale to the public under 'Bharat Atta' brand at an MRP not exceeding Rs 27.50/kg. This move was aimed at stabilisation of the price of essential commodities in the country.
India has been mostly absent from global wheat trade as its stocks tightened. Despite rising domestic wheat prices, the government has imposed an import tariff of 40 per cent since April 2019. The tariff has made imported wheat largely uncompetitive. However, as domestic prices have risen, India witnessed shipments of wheat from Australia, the European Union, and Canada. However, India’s upcoming harvest in March and April might alleviate some of the current paucity in supplies.
With erratic rainfall in 2023, the expected fall in wheat production, the government, with an aim to incentivise production of wheat, had increased the minimum support prices (MSP) for wheat by over 7 per cent in October, the highest single year hike. The FAS trade sources report that the high MSP is meant to funnel larger volumes of farmers’ wheat production through the MSP procurement channel. The government seeks to use MSP procurement this season to garner farmers’ support in the upcoming 2024 general elections.
At the same time, to balance the supply and demand scenario the country should have a strong storage capacity, which should be more than the production. Currently, the storage capacity in India for food grain production is only 47 per cent, whereas in the USA it is 161 per cent, Brazil 149 per cent, Canada 130 per cent and China 107 per cent. When the prices go down, farmers can use the storage capacity to store their produce and easily get a good price for the same.
To tide over this situation once for all, on February 24, Prime Minister Narendra
Modi inaugurated the pilot project of ‘World's Largest Grain Storage Scheme in Cooperative Sector’ in 11 Primary Agricultural Credit Societies (PACSS) in 11 states. Along with this, he also laid the foundation stone for an additional 500 PACSS across the country for the creation of godowns and other agriculturerelated infrastructure and also inaugurated a project for computerisation of 18,000 PACSS out of 65,000 PACSS. Soon, over 30,000 PACSS will be computerised and dedicated to the people. This will not only bring transparency and modernise them but also create further business opportunities.
Amit Shah, Union Minister for Cooperation, exuded confidence that by August, 2024, all PACSS of the country will be computerised and linked with the software. Shah further said that presently thousands of PACSS will increase storage capacity through which India will achieve 100 per cent storage capacity before 2027 and this will be done through the cooperative sector.