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Harish Damodaran

New Delhi, Aug 3 The firming up of open market prices has led to a substantial increase in demand for rice and wheat from the Food Corporation of India’s godowns.

While annual offtake of wheat under the public distribution system (PDS) has increased by over 1.2 million tonnes (mt) between 2002-03 and 2007-08, correspondingly it has gone up by as much as 12 mt in the case of rice.

Also, whereas earlier hardly 25-30 per cent of the grain allocations made by the Centre were being lifted by State Governments, that proportion stood at 80-90 per cent in 2007-08.

During the current fiscal so far, the offtake-allocation ratio is said to have risen even further to 90-95 per cent.

The above trends are clearly reflective of price movements. In the last five years, retail-level rates of ordinary PDS rice varieties (compatible with PDS quality grain) have climbed from Rs 10-12 to Rs 18-20 a kg, with wheat likewise shooting up from Rs 8-11 to Rs 13-16 a kg.

On the other hand, the Centre has since July 1, 2002 kept its issue price of wheat unchanged at Rs 4.15 a kg for the below poverty line (BPL) segment and at Rs 6.10 a kg for above poverty line (APL) ration cardholders.

Similarly, the BPL issue price for rice has been retained at Rs 5.65 a kg, while for APL families it is Rs 7.95 and Rs 8.30 a kg for common and grade ‘A’ varieties, respectively.

Of the roughly 33 mt of grain channelled through the PDS every year, 15 mt is issued under BPL and 9 mt under APL.

In addition, there is a third ‘poorest of the poor’ category, which gets another 9 mt under the Antodaya Anna Yojana (AAY) scheme at still lower issue prices of Rs 2 a kg for wheat and Rs 3 a kg for rice.

While these subsidised rates may not have made much of a difference five years ago, it is no longer so, given that open market prices are currently ruling at levels more than twice that of even APL.

Thus, there is a 100-plus per cent margin available on diversion of APL wheat and rice alone now — and, of course, many times more on BPL and AAY grain.

The result: A huge jump in demand for PDS grain, which is partly showing up in increased offtake levels.

How much of this grain flowing from FCI godowns is really reaching the intended beneficiaries and how much is getting leaked into the open market is anyone’s guess.

The Centre is, later this week, expected to unveil a new open market intervention scheme outside of the regular PDS. Under this, about six mt of wheat would be offloaded through Government stores and cooperatives at below prevailing market prices, but above the APL rate. By creating new price points between the APL and market prices, the Centre hopes to minimise leakages through the new scheme, which will cover non-PDS consumers as well.

More Stories on : Foodgrains | Rice | Wheat

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