Managing the food economy: Procurement must be aligned with requirements

With rice stocks far above buffer norms, India must shift from open-ended MSP procurement to diversified, sustainable agriculture without hurting farmer incomes

Public procurement and distribution are integral to India’s food economy. However, the system is marred by inefficiencies and distortions at various levels. For instance, central stocks of rice and wheat stood at nearly 59.45 million tonnes against a buffer requirement of 21.41 million tonnes as of January 2026, which is 178 per cent above what is needed. While buffer norms are designed to ensure food security under the public distribution system (PDS) and meet emergency needs, persistent accumulation far beyond these levels signals structural policy inadequacies. The strain is visible on the ground. This newspaper recently reported on farmers’ protests in Odisha over delays in paddy procurement despite receiving digital tokens at mandis. Meanwhile, Kerala is defending bonuses above the minimum support price (MSP). However, central stocks of rice held by Food Corporation of India (FCI) remain much above the buffer norms, raising concerns over surplus. Open-ended procurement at MSP, reinforced by state-level bonuses, has encouraged farmers to expand paddy acreage year after year, often at the cost of other important crops that India needs and soil quality. 

In this regard, there are several policy challenges. Excess procurement strains storage capacity and inflates the food subsidy bill. Grain that is procured must be stored, transported, insured, and eventually distributed or exported. When stocks significantly exceed the buffer norms, carrying costs rise and valuable fiscal resources are tied up in maintaining surplus inventories. Food subsidies are one of the largest expenditure heads of the Union government, exceeding ₹2 trillion a year. Further, skewed incentives distort cropping patterns and worsen groundwater depletion in paddy-growing states. Paddy is a water-intensive crop with a water footprint estimated at 3,000-5,000 litres per kg. Its sustained higher production, especially in stressed states such as Punjab and Haryana with declining water tables, deepens ecological stress. 

Assured procurement creates a predictable income stream and encourages farmers to stick with the rice-wheat cycle, even in agro-climatic zones better suited to other crops. Pulses and oilseeds, which enhance soil health, don’t offer this level of price certainty. Agricultural economist Ashok Gulati recently noted that India “is buried under rice”, with buffer stocks nearly four times the required levels even after free grain distribution to 800 million beneficiaries. Global markets are unable to absorb large volumes at favourable prices, making it costly to liquidate surplus stocks of rice. India has become the world’s largest producer of rice, surpassing China. It is often difficult to offload surplus stocks because the cost in India is higher than the prevailing international prices. 

The solution lies in gradually aligning procurement with PDS requirements instead of it remaining open-ended. State-level bonuses beyond MSP should be discouraged to avoid further distortions. At the same time, stronger and more credible incentives must be extended to pulses, oilseeds, and millets through assured procurement where necessary and better market linkages exist. Investment in decentralised storage can reduce wastage and carrying costs. The next phase of India’s food economy management must focus on diversification, self-reliance, and sustainable agriculture with lower fiscal costs. The way forward should be protecting farmers’ incomes without trapping Indian agriculture in a rice-wheat cycle.