In order to clear the excess stock at FCI, the government plans to cut the reserve price for rice from Rs 2785 per quintal to Rs 2250 per quintal. This move if implemented will bring the prices of paddy and rice down significantly in India. It is very hard to understand the decision making and planning of the government. FCI storage capacity is already at a critical level. Government is currently sitting on a buffer rice stock of 10 million tonnes. Now plans to sell at a loss of 535 rupees a quintal.
Open Market Sale Scheme
Food ministry runs the open market sale scheme (OMSS). Excess stocks are sold through OMSS under reserve price through open tender. Current reserve price for rice is at Rs 2785 per quintal that is way higher than the international price of long grain white rice 25% broken (estimated below 2200 per quintal). Current stock of rice at Food Corporation of India stands at 23.1 Million Tonnes. Yearly requirement for distribution under PDS scheme falls around 12-13 Million Tonnes. Why the government procured excess rice at MSP is baffling.
MSP Increase without Considering the International Market
The government in July 2019 hiked MSP on paddy by 65 rupees a quintal. MSP on paddy increased from Rs 1750 per quintal to Rs 1815 per quintal. This decision was to increase farmer’s income without considering the international market of rice. Farmer’s income requires significant increase according to current inflation levels in India. Only poor farmers should benefit from MSP not the rich farmers. Currently, there are no rules on procurement and FCI procures paddy (if under specification) from any farmer for Levy or custom milling. Now the government does not have an option but to make a loss on reserve price for rice.
Farmer’s Welfare over Water Crisis
The increased MSP led to an increase in paddy cultivation throughout India. Major states in India are going through depleting underground water table. We vouch for helping farmers in India but not at cost of a water crises. Agriculture planning should be number one priority of the government given the impact on environment. India imports more than 500000 Tons of pulses every year that can be easily cultivated in India. It also imports approximately 15 million tons of edible oil. India wouldn’t need to import edible oil if crop-growing pattern changes from paddy and wheat to other crops.
FCI is under a debt of 2.65 lakh crore that is supported by a loan from National Small Saving Funds (NSSF). It is highly likely this debt will keep increasing in the coming years. India currently needs a way to hold ministers responsible for wasting taxpayer’s money.
In conclusion, farmer’s welfare is understandable up to a point where common person does not suffer.
Price cuts should be exclusively for export markets not for local markets otherwise cheaper rice will again flow in government stocks .