Govt's grain procurement surpasses 50 MT...

...may cross last year's record purchase of 51 million tonnes.

For the second year in a row, the government’s grain procurement has crossed 50 million tonnes (MT) and is most likely to surpass the record purchase of over 51 MT achieved last year.

But, private interest in procurement of both wheat and rice has been limited, owing to the export ban and purchase restrictions imposed by the government. This, along with an increase in the Minimum Support Price (MSP), has aided government purchase. Wheat MSP was raised by 8 per cent and the rice purchase price by 20 per cent.
 

STUDYING THE SURPLUS

Procurement

• Wheat: 22.24 million tonnes
•   Rice: 28.45 million tonnes

Reasons

• Limited private interest due to export ban
• Various purchase restrictions
• Increase in the MSP helped govt to buy more

Importance

• Wheat and rice have a combined weight of 3.83 per cent in the wholesale price index

Wheat procurement has already touched 22.24 MT, marginally lower than the previous year’s procurement of 22.68 MT. Similarly, rice purchase has touched 28.45 MT, just below last year’s purchase of 28.5 MT. Arrival and purchase in both these commodities are still on, and it is likely, that whole year’s purchase in both will well surpass the record achieved last year.

The procured grain is distributed under various subsidised public distribution schemes. Annual wheat offtake under such schemes is estimated at 14 MT while the same for rice is 24.5 MT. This leaves behind huge surplus for the market.

A surplus grain stock would mean stable prices in the open market. The government may intervene if prices rise. Moreover, the government can allocate additional quantities to the weaker sections under public distribution schemes. Wheat and rice have a combined weight of 3.83 per cent in the wholesale price index.

As on May 1, the central pool had wheat stocks of 29.82 MT and rice stocks of 21.40 MT making for a total of 51.22 MT. The stocks of both the grains are much higher than the buffer stock norm for the period — 4 MT for wheat and 12.2 MT for rice.

While creating storage woes for the Food Corporation of India (FCI), the high stocks also add to government’s storage expenditure. The government spends Rs 3.58 on storage and preservation of one quintal of grain every month or Rs 35.80 on every tonne. This is the rate approved by the Ministry of Consumer Affairs for payments to various warehousing corporations.

While no decision has been taken to lift the export ban on rice, a group of ministers has approved export of 2 MT of wheat, which in effect will mean the end of ban.