Bumper wheat crop could spell trouble for FCI

This would be particularly so if the government's procurement of wheat is more than 30-35 million tonnes during the year, which is usually the norm

Ahead of the Lok Sabha elections, record wheat production in 2013-14 (July to June) is good news for the government. But for Food Corporation of India (FCI), it may present major challenges on the storage front, especially if the government’s wheat procurement stands at 30-35 million tonnes (mt), which is usually the case.

In 2012-13, FCI had procured a lower quantity of wheat compared to the previous year, the only such instance. Every year, wheat procurement starts on April 1. As of January 1 this year, food grain stocks were estimated at 41.13 mt, 64.52 per cent more than the requirement.

According to the second advance estimate of foodgrain production released by the agriculture ministry on Friday, India’s wheat production in the 2013-14 rabi season (July to June) will stand at an all-time of 96 mt, 2.23 per cent more than last year. Rice production is estimated at a record 106.19 mt, one per cent higher than in the previous rabi season. As of February 11, rice procurement, was estimated at 29 mt.

Officials said if the government bought about 35 mt of wheat in the 2013-14 season, total foodgrain (wheat and rice) stocks could stand at 80 mt by June 1 this year, against the actual requirement of 31.9 mt. FCI’s total storage capacity, including facilities rented from state governments, is about 75 mt.

Official in the food department say FCI’s woes have been compounded by its uncomfortable finances. Against the demand of additional food subsidy of about Rs 50,000 crore, the finance ministry has released just Rs 2,000 crore in the third supplementary. It has allowed FCI to raise Rs 8,000 crore through bonds.

“We are barely managing, as FCI has a cash-credit limit of about Rs 54,000 crore from banks, as well as bonds and a budgetary grant of Rs 2,000 crore,” said a senior FCI official. He added the real challenge would be managing its finances from April, when wheat procurement would start in full swing and payments have to be made to farmers. The interim Budget, to be presented on Monday, may provide just enough to meet the financial requirements till June.

“In many places, it has been learnt FCI is not lifting the milled rice from state governments due to a paucity of funds,” said Ashok Gulati, chairman of the Commission for Agriculture Costs and Prices.

	2008-09	2009-10	2010-11	2011-12	2012-13	2013-14*
Foodgrain Production	169.89	179.86	182.85	200.18	198.75	201.79
Foodgrain Procurement	56.78	57.41	56.71	63.39	70.59	---
*As per Second Advanced Estimate; Foodgrain production and procurement includes wheat and rice; Source: FCI and Department of Agriculture