FCI plans to hasten foodgrain sales, may expedite wheat selling in bulk

With record inventory, government-owned Food Corporation of India (FCI) wants to expedite foodgrain sales to make warehouse space available for next season’s procurement, as well as to calm the heated market. 

After record grain output in 2017-18, it saw a sharp rise in rice and wheat procurement with aggressive Minimum Support Price (MSP) buying. As of end-June, it had a record 24.3 million tonnes of rice and 43.8 mt of wheat.

Since then, it has released 5.3 mt of both, bringing down their total inventory in the central pool at 62.7 mt. However, even this is a record level.

“FCI along with state agencies, including state warehousing corporations (STCs), recorded a total procurement of wheat at 35.19 mt for the current season, 2018-19, following a bumper output. Because of the lack of scientific storage facilities, some quantity of rice and wheat is under Cover and Plinth Storage, which has been prioritised for sale,” said an FCI official.

An e-mail sent to senior FCI officials for this report did not elicit a response.

Amit Agarwal, director of Star Agri Warehousing and Collateral Management, believes the government would not like to release huge quantities of rice and wheat into the system ahead of kharif paddy sowing. For, this would have a huge bearing on the price of these two major cereals.

“Normally, FCI releases small quantities through the Open Market Sale Scheme and the Public Distribution System (PDS) between June and September. From October, it expedites sale of foodgrain to evacuate space for next season’s procurement and for fund raising. Thus, we can expect FCI to release a larger quantity from October, rather than now, in order to not let their prices crash,” said Agarwal.

The current stock of rice and wheat in FCI’s central pool is nearly 30 per cent of the total production, which was 210 mt for 2017-18, from 208.2 mt the previous year.

“The government will have to rely upon PDS for release of rice, due to the lack of bulk consumers in this segment. For wheat, however, they sell large quantities to flour mills and other such consumers, which FCI would start to release now, (perhaps) six-seven mt. In my view, FCI is waiting for the wheat price to move up to commence its selling to bulk consumers,” said Sanjay Kaul, managing director at National Collateral Management Services.

Experts believe the government is committed to buy wheat and rice from Punjab and Haryana, given the political forces there. So, irrespective of sale, FCI would continue to procure at the MSP from farmers in these two states.

“FCI procures foodgrain to meet the buffer needs of states. In a case of surplus production, the demand for rice and wheat goes down, resulting in no takers for FCI’s inventory. Apart from that, the quality of grain supplied through the PDS is also an issue for repeat orders from consumers,” says Vijay Sardana, an agriculture expert.

To encourage farmers on paddy sowing, the central government has raised the MSP by 5.4 per cent to Rs 15.5 a kg for 2017-18, along with an increase for other kharif crops.