Amid the heat of the ongoing Lok Sabha electioneering, the Centre has announced plans to significantly increase wheat purchase from non-traditional States of Uttar Pradesh, Rajasthan and Bihar and set a target of seven-fold jump in procurement to 50 lakh tonnes in the ongoing 2024-25 marketing year.

Further, even as the ban on outbound shipments of wheat continues, “it will be a dream for us to export now”, Food Secretary Sanjeev Chopra told reporters on April 4.

“U.P., Bihar, and Rajasthan have been contributing much less than they could have. We are targeting total wheat procurement of 310 lakh tonne this year. Of which, we are hoping to procure at least 50 lakh tonne from three non-traditional procurement States alone,” he said.

While Uttar Pradesh, Rajasthan, and Bihar put together contributed only 6.7 lakh tonnes to the Central pool during the 2023-24 marketing year (April-March), the Union Food Ministry has decided to procure 16% of the total wheat procurement target of 310 lakh tonne set for 2024-25. Wheat procurement at Minimum Support Price (MSP) is normally undertaken by the Centre’s nodal agency Food Corporation of India (FCI) and State agencies. However, cooperatives Nafed and NCCF have also been roped in with a procurement target of five lakh each this year.

Wheat MSP has been fixed at ₹2,275 per quintal for the current year. Since October, the Centre has been working with these three States to increase the procurement level. “Various steps have been taken to address the gaps and it should help boost procurement levels in three States,” he said.

Asserting that 2024 general elections is unlikely to affect wheat procurement operations, the Secretary said the increase in wheat procurement from non-traditional States will help restore allocation of wheat under the Pradhan Mantri Garib Kalyan Anna Yojana and other welfare schemes.

“The allocation of wheat has been reduced to 184 lakh tonnes annually from the previous 230-240 lakh tonnes under various welfare schemes in view of lower procurement in the last two years,” he added.

Mr. Chopra also said the Centre has not directed traders to avoid buying wheat from farmers till the government completes procurement. “No such instruction has been given to traders,” he added.

Highlighting steps taken to strengthen wheat procurement in non-traditional States, the Secretary said the procurement window has been advanced/extended to March instead of April 1, set up a dedicated farmer helpline to address procurement-related queries, intensified media publicity of MSP rate, and drying facilities have been provided for early harvested crop.

Besides, the government has advanced farmer registration from January 1 instead of March 1, simplified farmers’ land record verification, including tenant farmers, given flexible procurement targets to agencies.

More importantly, the Secretary said the government has decided to ensure transfer of MSP to bank accounts of farmers within 48 hours, streamlined procurement incidental burden for farmers, smoothened banking-related issues such as Aadhaar integration with bank accounts.

“The government has also opened more procurement centres targeting production hotspots, set up mobile procurement centres, decide to leverage Self Help Groups, Panchayats, Farmer Producer Organisations,” he said.

“That apart, the government has ensured institutional preparedness through working capital to agencies to ensure payment of MSP to farmers within 48 hours,” he added.

The Secretary further mentioned that a Central control room has been set up in the FCI headquarters in Delhi for real-time monitoring of procurement ad coordination among various agencies.

According to the Food Ministry, six lakh tonnes of wheat have already been procured so far this year from six States — Uttar Pradesh, Madhya Pradesh, Rajasthan, and Bihar. The procurement from traditional States of Punjab and Haryana will begin soon.

On prices of wheat and rice, the Secretary said wheat flour and wheat prices are stable at present after introduction of retail sale of wheat flour at ‘Bharat’ brand. About 7.06 lakh tonne of wheat flour has been sold till now.

“Even retail inflation of rice remained stable at 13% and 14% for the last two months. About 3.1 lakh tonne of FCI rice has been sold under Bharat brand since February,” he added.

Asked if the government will revisit the wheat export ban amid estimates of higher production, the Secretary said, “It’s a dream for us to export now.” The government has banned wheat exports since May 2022 to boost domestic availability and check prices.

The wheat production is estimated to be a record 112 million tonne during 2023-24, compared to last year’s 110 million tonnes as per the Agriculture Ministry.

Union Minister of Consumer Affairs, Food and Public Distribution Piyush Goyal addresses virtually during the 60th Foundation Day celebration of the Food Corporation of India (FCI), in New Delhi on Sunday. Secretary, Department of Food and Public Distribution, Sanjeev Chopra, and CMD Food Corporation of India (FCI) Ashok k.k. Meena are also seen.
| Photo Credit: ANI

The role of the Food Corporation of India (FCI) is not only to deliver ration, but also to instill confidence in farmers and beneficiaries by bringing in transparency, efficiency and accountability, said Union Food Minister Piyush Goyal here on Sunday in his address on the 60th foundation day of the FCI. Mr. Goyal urged the youth and officers in the FCI to turn as whistleblowers to ensure transparency in running the organisation.

He said the FCI should emerge as a trusted partner of farmers and people of the country. “The FCI plays a crucial role in facilitating flagship schemes such as Pradhan Mantri Garib Kalyan Anna Yojana [PMGKAY] by providing ration to beneficiaries in every corner of the country,” the Minister said, reminding the officers that the role of the FCI was not only to deliver the ration. He added that Prime Minister Narendra Modi had promised to make India free of corruption and asked the youth and staff of the FCI to bring in transparency and become whistleblowers.

‘Ensure quality’

Mr. Goyal said the FCI needed to embrace digitalisation and technology by ensuring quality. “Quality can be achieved in areas such as inspection, procurement, transportation, distribution and storage,” he said, and suggested the FCI to reduce operational costs through route optimisation, mechanised loading/unloading, innovative storage solutions and others.

The Minister said the open market sale scheme (domestic) operations had also proved to be an effective tool in moderating the prices of wheat and rice. “Bharat Atta, Bharat Dal, interventions regarding onion and tomato have assisted the Government of India in price stabilisation,” Mr. Goyal said.

The Union Food Ministry indicated that it is willing to make changes to the Open Market Sales Scheme after the first e-auction of rice
| Photo Credit: SHIV KUMAR PUSHPAKAR

As the Congress attacked the Centre on Monday over the reluctance of private players to auction rice from the Food Corporation of India (FCI) under the Open Market Sales Scheme, the Union Food Ministry indicated that it is willing to make changes to the scheme. The Centre had recently restricted the States from purchasing food grains using OMSS and the Congress said the BJP Government was favouring private players over State governments.

Centre may tweak policy

Union Food Secretary Sanjeev Chopra said the Centre is aware of the lukewarm response to the OMSS by traders and is watching the situation. He, however, maintained that it was the first e-auction of rice and the Centre is open to tweaking the policy.

Also read: Explained | The Centre-state tussle over the Open Market Sale Scheme

He, however, said the policy cannot be changed for a State or a class of people. He said more than 15 States, including Tamil Nadu supported the Centre’s stand in the meeting. “Let’s not get discouraged with one round not getting good response. ….Usually, FCI does not do routine OMSS for rice. It is primarily done for wheat. For rice, it just started. We expected more (response) for rice, but it has not happened,” Mr. Chopra said.

He said the Centre’s intention was to give a signal to the market that the stock is with the government we and will use it in the interest of the common man to bring down the prices. “We will wait and watch. We don’t want to jump the gun. This is the first auction. The government is open to changes,” he added.

Cash transfer scheme

Congress general secretary Jairam Ramesh, meanwhile, said in a statement that the Government in Karnataka will not be shaken in its resolve to implement the Anna Bhagya scheme. “The cash transfer scheme launched today by the Congress Government in Karnataka is a strong reply to the Modi Government’s vindictive policies in regard to food security for the poor, especially in a State where the BJP was comprehensively rejected,” he said.

He said the e-auction of rice flopped miserably and more than 99% of the rice offered for e-auction remained unsold. “In any case, it is clear that the Modi Government has greater faith in private traders to control inflation than in state governments and the public distribution system,” he said.

The story so far: On September 9, the Centre instituted a ban on the export of broken rice. Additionally, it mandated an export duty of 20% on rice in husk (paddy or rough), husked (brown rice) and semi-milled or wholly-milled rice. The measures do not affect export of basmati or parboiled rice. The Secretary at the Department of Food and Public Distribution Sudhanshu Pandey stated that the measures would ensure adequate availability of broken rice for consumption by the domestic poultry industry and for other animal feedstock. Additionally, it would sustain production of ethanol that would further assist the successful implementation of the Union government’s Ethanol Blending Programme (EBP). However, the measures may affect countries dependent on Indian food exports in the face of a lost ‘breadbasket’ in Ukraine owing to the Russian conflict.

What does it have to do with inflation?

The lower the supply of a commodity, the higher would be the price of a product, which results in inflationary pressures. The adequacy of rice stocks in the country would ensure that markets do not experience excess demand and thus, trigger an abrupt price rise. For seven consecutive months, inflation has been above the Reserve Bank of India’s 6% tolerability threshold. The Consumer Price Index (CPI), or retail-based inflation, stood at 7% in August this year with rural and urban inflation scaling 7.15% and 6.72% respectively. This was furthered by an uptick of 7.62% in food prices during the same period.

The COVID-19 pandemic also had an impact on India’s previously held surplus. As a reaction to the distresses caused by the pandemic to the vulnerable sections the Union Cabinet had introduced a food security program, called the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) in March 2020. The scheme provisions an additional 5kg ration per person each month in addition to their normal quota of foodgrains under the National Food Security Act. In March, the scheme was extended for another six months until September 2022.

The Hindu Businessline had reported this week that foodgrain stocks (including rice, wheat and unmilled paddy) in the Food Corporation of India (FCI)’s central pool had dropped 33.5% on a year-over-year basis to 60.11 million tonnes as of September 1 — prompting doubts on the continuation of the scheme. Research analysts at Nomura observe that on the whole, though rice stocks should remain above buffer levels, the current export restrictions may not necessarily improve the demand-supply situation materially, implying, that there remains an upside risk to the price of rice. “As such, we believe there is a risk that further curbs on rice exports could be imposed, particularly in categories still exempted,” it states.

What happened to rice production?

The major rice cultivation season in India is the Kharif season, that entails sowing the crop during June-July and harvesting them in November-December.

It is imperative to note that rice is a water-intensive crop which also requires a hot and humid climate. Thus, it is best suited to regions which have high humidity, prolonged sunshine and an assured supply of water. It is for this reason that the eastern and southern regions of the country, with sustainable humidity and suitable mean temperatures are deemed favourable for the crop. While the two regions are able to grow paddy crops throughout the year, higher rainfall and temperature prompt the northern regions to grow only one crop of rice from May to November. Andhra Pradesh, Telangana, Punjab, Haryana, Chhattisgarh, Odisha, Madhya Pradesh, Tamil Nadu, Maharashtra, Uttar Pradesh and Bihar are among the rice producing States in India.

A perusal of Indian Meteorological Dept’s data, between June 1 and September 14 illustrate that Uttar Pradesh, Jharkhand, Punjab and Bihar have experienced deficient rainfall. The latter refers to rainfall being 20-59% below normal in a particular region. Although West Bengal, the country’s largest producer, has overall experienced a normal rainfall, its major productivity areas such as Nadia, Burdwan and Birbhum have had deficient rainfall. This indicates a potentially lower produce this year.

What are the concerns on ethanol blending?

Ethanol is an agro-based product, mainly produced from molasses, which is a by-product of the sugar industry. The EBP endeavours to blend ethanol with vehicular fuels as a means to combat the use of fossil fuels and in turn, rising pollution. As per the government, sugar-based feed stocks alone would not be able to meet its stipulated target of 20% ethanol blending by 2025.

In the 2018-19 Ethanol Supply Year (ESY), the government had allowed the FCI to sell surplus rice to ethanol plants for fuel production. The idea was to have in place an insurance scheme and an emergency provision for distillers.

However, in the ongoing ESY, because of supply constraints there has been an uptick in the procurement of rice from the FCI. The total ethanol produced from rice lifted from the FCI stood at 26.64 crore litres whereas that from damaged food grains outside the FCI purview stood at 16.36 crore litres. This means that the production accruing from FCI rice has increased 10-fold from the 2.2 crore litres used in a full ESY. At the same time, production from damaged foodgrains stands at half.

Thus, the export ban would endeavour to catch-up with this supply and additionally, unburden the FCI from provisioning to distillers.

What are the likely after-effects of the ban?

Geopolitical tensions between Russia and Ukraine have unsettled global food supply chains. With trade disrupted in the Black Sea region, Bloomberg reported in March that prices of rice are surging because traders are betting it will be an alternative for wheat which is becoming prohibitively expensive.

India accounted for 41% of the total rice exports in the world in 2021 larger than the next four exporters (Thailand, Vietnam, Pakistan and United States) combined.

As for broken rice, the United States Department of Agriculture (USDA) states that India accounted for more than half of the commodity’s global exports in the first half of 2022. As per government figures, between April and August this year, broken rice’s share in the overall rice export mix (of India) was 22.78% compared to 18.89% in FY 2021.

In descending order, China, Senegal, Vietnam, Djibouti and Indonesia are the biggest importers of India’s broken rice.

Senior Executive Director at the All-India Rice Exporters Association Vinod Kumaar Kaul told The Hindu, “Thailand, Vietnam and Pakistan would gain should we happen to lose this market. Once lost, regaining the market would be a task.”

Mr. Kaul pegs the losses to the exporters from the ban to be around ₹5,600 crore for the full year.

THE GIST

On September 9, the Centre instituted a ban on the export of broken rice. Additionally, it mandated an export duty of 20% on rice in husk (paddy or rough), husked (brown rice) and semi-milled or wholly-milled rice. 

In the ongoing Ethanol Supply Year, because of supply constraints there has been an uptick in the procurement of rice from the FCI. The export ban is a means to catch-up with this supply and additionally, unburden the FCI from provisioning to distillers.

With trade disrupted in the Black Sea region, prices of rice are surging because traders are betting it will be an alternative for wheat which is becoming prohibitively expensive. India accounted for 41% of the total rice exports in the world in 2021.