Govt move to clear grain stocks with FCI; Corpn holding 2.6 times the buffer norm
In an article dated January 6, 2020 (MSP hike leaves FCI with mountain of grains), BusinessLine had indicated that FCI may have to sell a significant amount of its rice stock in the open market if it has to make room for fresh procurement of paddy and wheat. The time for this has come.
The government has cut sharply the reserve price of rice and wheat to help FCI offload bulk of its stock.
In the Open Market Sale Scheme (OMSS), rice will now be sold at Rs.2,250/quintal against Rs.2,785/quintal earlier.
The reserve price of wheat has also been cut. It is now Rs.2,135/quintal. Originally, price for the January-March period was fixed at Rs.2,245/quintal.
Already, the reserve price, both of rice and wheat, was way lower to the economic cost of FCI. Now, with the price cut, the gap has increased further.
Economic cost – i.e., MSP plus cost of logistics, storage, handling and distribution for FCI, is estimated at Rs.2,505/quintal for wheat and Rs.3,601/quintal for rice.
Why?
The government has to cut the sale price on grains for OMSS due to the excess stock with FCI, as well as the Corporation running out of storage space. As of January 1, 2020, the stock of rice was 237.15 lakh tonnes and the stock of wheat was 327.96 lakh tonnes. As per the buffer stock norm, only 76 lakh tonnes of rice and 138 lakh tonnes of wheat are required.
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