The Food Corporation of India (FCI) is mandated to hold certain volume of procured food grains as buffer stock for a sustained period. This stock is maintained to ensure food security, stabilize prices, and meet any unforeseen emergencies. Data indicates that the Central Pool stocks of Rice & Wheat are the lowest in the last few years though they are more than the minimum levels.
On 09 August 2023, Government of India announced that the Food Corporation of India (FCI) would be offloading 50 LMT of wheat and 25 LMT of rice in the open market in a phased manner under the Open Market Sale Scheme (Domestic) for sale through an E-auction. This would be as per the reserve prices fixed by the government. It also added that the reserve price for rice would be brought down by Rs. 200/Qtl, making the effective price Rs. 2900/Qtl. The objective behind offloading is to moderate the prices of these food grains which have continued to be high despite various measures taken by the government as well as to tame inflation.
Earlier, the government announced a ban on non-basmati white rice to lower the price as well as ensure availability in the domestic market. This led to fear worldwide that the move would further elevate the already-high price of rice in the international market as the ban would tighten the global rice availability. India is the world’s leading rice exporter, accounting for more than 40% of the global rice trade followed by China.
The Food Corporation of India (FCI) is mandated to hold a certain volume of procured food grains as buffer stock for a sustained period. This stock is maintained to ensure food security, stabilize prices, and meet any unforeseen emergencies like droughts, natural disasters, or supply disruptions. (To know more about FCI and its role in procurement and storage, read Factly’s story) But what is the available level of food grain stocks in India? How much should the government maintain? We discuss these questions in this story.
FCI maintains monthly data on food grain stocks available in the central pool
The FCI maintains data on the available food grain stocks in the Central Pool at the beginning of every month. The information includes the stocks for Rice, Wheat, Un-milled Paddy, and Coarse grains. The stocks with FCI include Operational Stocks (to meet monthly demand under Public Distribution) and buffer stocks (maintained to meet any exigencies or to cover any shortfall in procurement). For this story, we have taken data from Dataful and the data is as of 01 August 2023.
The following graph shows the monthly buffer stock positions of rice and wheat as of 01 of every month since January 2014. The stock position is dependent on various factors such as the volume of procurement and the distribution of stocks.
Rice stock is the lowest in 2023 as compared to the last five years
Rice: In the first half of every year, the stock of rice gradually rises as most of the procurement happens in this period. However, in the second half, the stock declines as rice is a Kharif crop which is usually sown in June – July in most parts of the country. However, month-on-month comparison shows that until 2020, there was an overall increase in the stock maintained in each month. In 2020, the government started distributing more food grains to the public as a measure to deal with the pandemic-induced lockdown. Production was also hit in this period. Since 2020, the year 2023 has recorded the lowest stock. In January 2023, the stock was 123.35 MLT, much lower than that in 2022 when it was 221.54 LMT. This is the lowest stock recorded in the month of January since 2015. In most of the other months for which data is available as of 2023, the stock was close to the 2016-2017 levels, much lower than that in 2022.
Stock of wheat in March and April 2023 was about half of that in 2022
Wheat: Like in the case of rice, a cycle in stock is also witnessed in the case of wheat. Wheat, being a Rabi crop, is usually sown in the winter season (towards the end of the year) and harvested in March–May. This is the period when the stock with FCI is the highest before falling in the following months. While there was not much of a difference in the stock between 2014 and 2017, there was a gradual increase in the stock of wheat from 2018 to 2021 before witnessing a drop in 2022. In fact, the stock had dropped to less than 50% of the stock during the same time in 2021 in few of the months. The government had also imposed a ban on wheat exports then. This year, it was half of that recorded in 2022 in the months of March and April. In May 2023, the stock improved to 290 LMT. Nonetheless, it is still lower than that in May 2022 and May 2021, when the stock was 303.46 LMT and 525.65 LMT, respectively.
The minimum stocks of rice and wheat that need to be maintained in the Central Pool at the beginning of each quarter is notified by the Central Government. The strategic reserve of rice and wheat to be maintained is 20 LMT and 30 LMT respectively throughout the year while the operational stock varies as per the season.
Rice stocks is better positioned than wheat stocks compared to the minimum requirement
Compared to the stocking norms, the stock of rice in the first quarter of 2023 (as of January 2023) was 123.35 LMT. Though this is low compared to the same time in the previous years, it is still higher than the minimum stock level of 76.1 LMT including both operational stock and strategic reserve. The minimum stock in the chart includes the total reserve including both types of stock to be maintained as per the norms. Likewise, in April 2023, the stock of rice was 248.6 LMT and in July 2023, the stock of rice was 253.49 LMT as against the minimum requirement of 117.8 LMT and 117.4 LMT, respectively. That is, the stock continues to be well above the minimum requirement set. It should be noted that the current food grain stocking norms are in effect since more than 6 years, from 01 July 2017.
In the case of wheat, as of 01 January, in 2023, the stock available was 171.7 LMT as against the norm of 138 LMT. In April, as per the norm, the minimum stock is to be 74.6 LMT and the wheat availability as of 01 April 2023 was 83.45 LMT, marginally more than the minimum stock. In the third quarter, as of July 2023, India had 301.45 LMT, slightly more than the minimum requirement of 275.8 LMT.
Data indicates that there has been an overall reduction in the stocks available with the FCI with respect to both the staple food grains of India- rice and wheat. In the last two years, the buffer stocks available are closer to the minimum stocks required to be maintained as per the buffer stocking norms. Such a decline is being witnessed at a time when the procurement has improved. The procurement of rice was more than 570 LMT in the last 3 years as compared to about 300 to 400 LMT between 2012-13 and 2017-18. However, in the case of wheat, the procurement has also been low in the last two years which should have impacted the wheat stocks.