It is time for a thorough overhaul of the foodgrains procurement and buffer stocking policy. With the rabi season harvest of grains — mainly wheat, followed by paddy — just days away, a major challenge will be finding appropriate storage space. As of March 1, the Food Corporation of India carries 45.8 million tonnes of rice (28.7 mt) and wheat (17.1 mt) — more than twice the prescribed buffer stock norm that includes a Food Security Reserve of five million tonnes. A sizeable part of the current inventory is practically in the open, euphemistically called CAP (cover and plinth). Some wheat stocks have been lying in private warehouses for three years now, incurring heavy ‘carrying costs' of about Rs 2,400 a tonne per annum. If the wheat harvest does turn out to be as high as the anticipated 80 million tonnes, procurement can potentially be nearly 20 million tonnes. Within government control, there simply is no storage space anywhere for this large addition.

Unfortunately, the government lacks a sound strategy for release of surplus grains in the market. In the short term, there are two ways the issue can be addressed. One, some of the existing stocks will have to be liquidated through a combination of exports and domestic sale; and, two, procurement in the new season must be limited. Indeed, the ground for keeping the procurement volume flexible has been spelt out in the Economic Survey 2010-11 that makes a case for pegging each year's procurement to the production. There is also a case for expanding the scope of procurement by setting up take-in windows in different parts of the country, instead of relying more on such frontline States as Punjab, Haryana and Uttar Pradesh. The Centre must seriously examine these suggestions.

The decision to export or sell locally is, of course, fraught with risks. Currently, in the open market, wheat is available at close to, or in some places even lower than, the minimum support price, whereas the cost of FCI wheat could be 10-15 per cent higher. Without a subsidy, there will be no takers for FCI wheat. We may soon reach a point where the government will be left with no choice but to subsidise FCI wheat sales in the open market. In the event, such sales should be made in small lots to numerous small traders across the country so that grain distribution is diffused geographically, instead of the usual bulk sale that creates local monopolies. As for export, the private trade should be allowed to explore overseas markets without any subsidy support. While it is imperative that a part of the buffer stocks will have to be liquidated, limiting the volume of wheat procurement in the coming season appears to be a more judicious option. New Delhi must demonstrate sufficient political will to do it.

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