Apart from selling to states, the government will also resume its open-market sales scheme for private traders and offer rice at a discounted rate.

Centre to resume rice sale to states, pvt traders

The Centre will resume sale of federally-held rice to states, which had been discontinued in June last year, at the time sparking protests by Opposition-ruled state governments, apart from selling the staple to private traders, steps aimed at paring record inventories, a person aware of the development said.

The move to trim piling rice stocks has been necessitated by not only constraints of storage space, but also high costs of maintaining surplus reserves. These expenses could inflate the food subsidy bill by nearly ₹16000- ₹18000 crore when the Modi government presents its full budget later this month, according to a second person with knowledge of the matter.

The food ministry is learnt to have recommended liquidation of excess rice stocks to an interministerial committee led by home minister Amit Shah, which monitors inflation and food management, thus paving the way for resumption of rice sales.

Apart from selling to states, the government will also resume its open-market sales scheme (OMSS) for private traders and offer rice at a discounted rate to lessen stocks.

Last year, the rate at which bulk buyers, such as biscuit makers, were offered state-held rice was ₹29/kg. The government could sell very little rice, about 100,000 tonne, at that rate. In contrast, the government sold nearly 10 million tonnes of wheat to cool prices.

The Food Corporation of India (FCI), the Centre’s main grain-handling arm, currently has 50 million tonnes of rice, more than three times the mandatory buffer requirement of 13.54 million tonnes. Of the total stocks, FCI is yet to receive about 17 million tonnes from millers, which will put pressure on available storage space.

The government’s decision last year to stop selling rice to states under its open-market sales scheme (OMSS) had angered states, such as Tamil Nadu, Karnataka and Kerala, which are ruled by Opposition parties. Karnataka at the time had accused the Centre of undermining its food schemes.

The central government had cited a poor monsoon, high prices and possible shortages of kharif or summer-sown farm produce as a reason for stopping rice sales to states under the OMSS.

“Considering expected deficiency in rainfall caused by El Nino as speculated by IMD due to which kharif crop production in country may be adversely affected, and in order to control inflationary trends…the sale of wheat and rice under Open Market Sale Scheme (Domestic) for State Governments, including Tamil Nadu, has been discontinued with effect from June 13,” the then minister of state for food and consumer affairs, Sadhvi Niranjan Jyoti stated in a written reply in the Lok Sabha on July 26, 2023.

The resumption of open-market sales of rice will inject “direct cash”, resulting in substantial savings in the food subsidy bill, the first person cited above said. FCI approximately spends ₹3975 to buy, transport and stock one quintal (100 kg) of rice.

In 2023-24, the government’s food subsidy bill stood at ₹2.12 lakh crore, which included costs incurred to distribute free grains to 800 million beneficiaries under the National Food Security Act 2013.

Published Date: July 5, 2024