The Hindu Business Line : Food for thought

As wheat procurement gathers pace, the onus will have to be on FCI and state-level procurement agencies to ensure there is no dearth of quality storage.

India’s bumper wheat crop and the consequential issues of procurement, storage, logistics and food subsidy have underscored the weaknesses in India’s foodgrain management system. Despite an impressive wheat procurement effort so far this season, prices are ruling below the minimum support price (MSP) of Rs 1,080 a quintal in some markets. As in the last season, wheat procurement this season could aggregate close to 30 per cent of the output of 78 million tonnes. The two years mark a break from the trend in the previous five years, when procurement was about a fifth of the output. As a result of higher procurement now, wheat stocks with the Food Corporation of India (FCI) have swelled to 14 million tonnes, compared with the minimum stock norm of 4 million tonnes as of April 1. To send the right signals about marketing support to wheat growers, FCI will have to strengthen its procurement efforts, more so when export curbs are in place.

The economic and social consequences of low stocks and/or limited storage capacities cannot be overlooked. Rising incomes and demographic pressure have combined to push demand for foodgrains higher in recent years. There is a school of thought that the current foodgrain stocks of 35 million tonnes can no longer be considered excessive. Also, there may be a case to revise upwards the minimum stock norms for fine cereals. The country was forced to import wheat not too long ago. Foodgrain management is not merely buying and storing cereals. The success of managing public stocks of foods lies in minimising carrying costs, optimising inventory levels and reining in open market prices through intervention with the right quantity at the right time.

The stocks with the FCI must be deployed to fight the current high levels of food inflation. At the same time, higher foodgrain output (especially wheat and rice) should be accompanied by a proportionate expansion in storage capacity across the country. There has to be a rational nexus between the foodgrain output target and storage capacity. Yet, at about 13 million tonnes, FCI’s own storage capacity has remained unchanged since 2003, hardly enough to cover even a tenth of rice and wheat output, although it has been renting space for another 8 million tonnes. Efforts to enhance storage on a public-private partnership (PPP) basis have not yielded tangible results. It is time the government considered a fresh approach. No doubt, a ‘National Policy on Handling, Storage and Transportation of Foodgrains’ was announced in June 2004, but uncertainties in output and decline in annual procurement since then seem to have contributed to inaction on the storage capacity front. The onus will have to be on FCI and State-level procurement agencies to ensure there is no dearth of quality storage space.

Related Stories:
Wheat arrivals higher as farmers find no merit in storing
Wheat procurement may face storage space woes
Grains, at what cost?

More Stories on : Editorial | Foodgrains | Storage

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