Govt looks at changing long-term grain procurement policy

Open-ended purchases by FCI leave very little marketable surplus for private traders

Saddled with huge foodgrain stocks and a burgeoning subsidy bill, the food ministry is working on a long-term procurement policy.

Officials said one was needed due to the outcome of the present policy, wherein whatever is brought in by farmers is taken by state agencies. “There has to be some solution to this and the open-ended nature of foodgrain procurement cannot continue for long,” said an official.

Food Minister K V Thomas met Prime Minister Manmohan Singh on Tuesday and also held a discussion with Agriculture Minister Sharad Pawar to discuss the contours of such a policy. “Earlier, state agencies and Food Corporation of India (FCI) used to procure 25-30 per cent of the total marketable surplus of foodgrain, but in the past few years, we have procured over 35 per cent of the surplus,” the official added.

Such huge buying puts undue pressure on food subsidy, the requirement of which is expected to reach a little over Rs 1,00,000 crore in the 2012-13 financial year, as against the Budget Estimate of Rs 75,000 crore. Foodgrain stocks in the central pool on October 1 was estimated at about 70 million tonnes, as against the storage space of 66 mt. This could get worse: The government plans to procure around 40 mt of rice for the central pool in the 2012-13 crop marketing that began on October 1, four to five mt more than the actual procurement of last year.

“This open-ended procurement by FCI and state agencies leaves very little marketable surplus for private traders, leading to a shortage of grain for retail markets,” said the official. This year, for instance, wheat flour prices in the open market have flared because of low purchases by private traders.

“To counter this shortage, the Centre will release another seven mt of wheat in the open market, over and above the already released seven mt,” the official said.