< Previous | Contents | Next >
The total capacity available for storage of foodgrains as by 2014 was 727 lakh MT, comprising covered godowns of 567 lakh MT capacity and cover and plinth (CAP) facilities of 160 lakh MT capacity. The existing warehousing facility is limited not only in terms of capacity, but also to certain crops. The stockholding capacity has not kept pace with the increase in production and demand for a long time. The challenges of storage have been outlined by the Economic Survey 2014–15 in the following way:
(i) The CAP of 160 lakh MT capacity cannot be treated as scientific storage.
(b) Public agencies do not have warehouses for proper storage of even half of the wheat and rice procured by them.
(c) In the wake of persistent seasonal inflation in perishables like fruits and vegetables, there was no effective strategy to control inflation on a sustainable basis.
(iv) Cold storage capacity for all type of food items is just 29 MT (Planning Commission 2012). The pro duction of potato alone is about 35 MT.
(v) Cold storage facility is available for only 10 per cent of fruits and vegetables produced in India (Planning Commission 2011).
To bridge the gap between the requirement and availability of scientific storage capacity is the immediate need of the hour. For this, it is advisable to promote the policies by which private sector investment can be attracted to it.
The economic cost of foodgrains consists of three components, namely the MSP including central bonus (the price paid to farmers), procurement incidentals, and the cost of distribution. The economic cost for both wheat
and rice witnessed significant increase during the last few years due to increase in MSPs and proportionate increase in incidentals as well as other costs. As per the Government, the economic costs of wheat and rice in 2016– 17 are estimated to be over Rs. 30 and Rs. 22 per kg, respectively (they were around Rs. 20 and Rs 15 in 2010–11).
High economic cost necessitated a detailed review of the open-ended procurement policy, especially in states that offer high bonus on top of MSP and those that impose high taxes and statutory levies, as well as stocking and distribution policies. In this regard, the government set up a High Level Committee (HLC) in August 2014 (Shanta Kumar as its Chairman) to suggest inter-alia restructuring or unbundling of the FCI with a view to improve its operational efficiency and financial management.
The FCI has been undertaking sale of wheat at pre-determined prices (reserve prices) in the open market from time to time, known as the Open Market Sale Scheme (OMSS). This is aimed at serving the following objectives:
(i) to enhance market supply of foodgrains;
(ii) to exercise a moderating influence on open market prices; and
(iii) to offload surplus stocks.
Under the Open Market Sale Scheme (Domestic), the government now adopts a policy of differential prices to encourage sale of older stock first— sticking to the following policy stance:
(i) Keeping the reserve price above MSP, but reasonably below the acquisition cost or economic cost of wheat, so that the buyers remain attracted to purchase of wheat from the mandis during the harvest season and the market remains competitive.
(ii) Maintaining that the market price during the lean season does not increase much and inflation remains under check.
The Government of India, by late March 2015, launched the Price
Stabilisation Fund (PSF) as a Central Sector Scheme to support market interventions for price control of perishable agri-horticultural commodities. The cost to be borne between the centre and the states in equal ratio (in case of the North Eastern-states, the respective share will be 75:25). The scheme will commence with only two crops, viz., onion and potato.