As granaries bulge, govt plans to give away food
NEW DELHI: The Union government’s record buying of vast quantities of food grains from farmers at minimum support prices this year points to a glut of cereals, with stocks breaching previous limits, prompting the government to make additional plans to pare reserves.
Even after distributing subsidised grains to nearly 730 million beneficiaries under the National Food Security Act and additional distribution of 5kg free grains per month per person under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), the government will be left with more than it requires to mandatorily keep aside as emergency reserves, known as buffer stock.
Since the government pays higher prices every year to buy large quantities of cereals because of the annual increase in guaranteed rates known as minimum support prices (MSPS), Indian wheat can hardly be exported competitively. It is pricier compared to wheat from other exporting nations.
In the current season, the government has procured over 41 million tonne of wheat, a record. It has so far paid an MSP value of Rs 81,000 crore to cereal growers.
In May, the government had a total stock of 83 million tonne of cereals (wheat and paddy), which is 11 times more than the mandatory grain reserve limit. This included nearly 30 million tonne of rice and 52 million tonne of wheat, according to official figures.
Bulging stocks with the Food Corporation of India, the government’s main food-handling agency, has prompted the government to take extra measures to pare stocks.
“The government has resorted to open-market sales. It is also taking steps such as distribution of food to NGOS for onward distribution to the needy, distribution to armed forces and prisons, etc,” an official said, asking not to be named. The government resorts to open-market sales usually at a price below the cost of buying these grains.
The government is currently in the process of drawing up plans to make extra allocation to institutions such as NGOS and the armed forces, the official said. It has already sold 300,000 tonne of food grains in May to private traders.
The PMGKAY will help clear out storage space for oncoming harvests, the official said. The scheme will continue till November.
The government’s procurement of food grains stands nearly 13% higher than the previous year, caused by overproduction of grains even as the country faces a deficit of other essential commodities such as oilseeds and pulses.
Of the 41 million tonne of wheat procured, 13.2 million tonne was bought from Punjab’s farmers, the highest, followed by 12.8 million tonne from Madhya Pradesh and 8.4 million tonne from Haryana farmers.
“Higher prices mean Indian wheat must be sold at a minimum of $38 a tonne, which is higher than global prices,” said Abhishek Agrawal of Comtrade, a commodities trading firm.
New MSPS announced on Wednesday for summer-sown crops are geared toward nudging farmers to shift away from plentiful cereals, by setting higher prices for oilseeds and pulses, whose output and supply are relatively scarce. For instance, India imports up to two-thirds of its vegetable oil to meet domestic demand.
MSPS are federally fixed floor prices for crops aimed at avoiding distress sale by farmers and signalling a benchmark rate for private traders. But private traders can pay higher rates or, as is often the case, lower than MSP, depending on market forces of demand and supply.
However, farmers are yet again likely to grow more cereals than oilseeds, a lopsided cropping pattern because the government mainly buys wheat and rice at MSP rates and distributes them to beneficiaries through the public distribution system at subsidised rates. This is primarily how farmers benefit from the MSP system.
“This doesn’t really help India’s nutritional security. The PDS system means the poor has access to a lot of carbohydrates but not enough of other nutrients at affordable prices,” said Alokesh Khandekar of the Consultative Group on International Agricultural Research (CGIAR).
Experts say the real nudge to farmers to diversify away from plentiful cereals would be to guarantee procurement of oilseeds and pulses in sufficiently large quantities. “The higher MSPS for oilseeds and pulses signals farmers about the rate which they should get, not what they actually get from the markets,” said KS Mani, a former faculty with the Tamil Nadu Agriculture University.