With Food Corporation of India granaries overflowing, the government is looking to liquidate its grain stocks to prevent damage and minimise the carrying cost in the country beyond the requirement. In fact, the Food Ministry wants the Ministry of External Affairs to look at the option of presenting the surplus grain stocks as “humanitarian aid to deserving countries”.
Sources told The Indian Express: “The Department of Food and Public Distribution has requested the Ministry of External Affairs to explore the possibility of export of wheat and rice from the surplus stock available with FCI, through G2G (government-to-government) basis in the form of humanitarian aid to deserving countries.”
Earlier this year, a committee of secretaries too recommended that the possibility of offering surplus stocks of wheat in the form of aid to deserving countries be explored in coordination with the MEA. The Ministry of Consumer Affairs, Food and Public Distribution had made similar request to the MEA at least twice in the last two years.
“Despite repeated requests, there has been no positive outcome,” sources said.
Procurement of wheat and rice in the central pool has been increasing over the years, leading to accumulation of surplus stock of wheat and rice with FCI. As a result, stocks of food grain in the central pool continue to remain much in excess of stocking norms.
As per stocking norms, the total requirement of food grain in the central pool as of July 1 was 411.20 lakh tonnes, and as of October 1 307.70 lakh tonnes. However, as of September 1, the stock available in the central pool was 669.15 lakh tonnes (254.25 lakh tonnes of rice and 414.90 lakh tonnes of wheat).
“The present procurement and lifting pattern of wheat and rice indicate that in near future, FCI may have to carry huge and undisposed stocks, leading to not only blockage of borrowed funds but difficulty in accommodating new crop of wheat and rice due to occupation of space by the old stocks,” a note prepared by the DoF&PD states.
“Therefore, for it would be in our interest to liquidate at least a part of the surplus stock of wheat and rice available with the FCI by offering the same as humanitarian aid to deserving foreign countries,” it states.
In the past, India has donated food grain to some countries. For instance in 2011-12, 2013-14 and 2017-18, India donated more than 3.5 lakh metric tonne quantity of wheat to Afghanistan. In 2012-13, a quantity of 2,447 metric tonne of rice was given to Yemen as humanitarian aid. Similarly, a small quantity of rice was also donated to each one of five countries — Myanmar, Sri Lanka, Zimbabwe, Lesotho and Namibia — between 2014-15 and 2017-18. But the same has not happened in the last two years.
“Earlier, the quantity of food grain donated was too small, this time we want MEA to do this in a big way,” sources said.
The FCI has tried to sell the surplus stock through the Open Market Sales Scheme (OMSS) but the results have not been encouraging so far. According to data available on its website, during 2019-20, FCI offered 22.92 lakh tonnes of wheat but the actual quantity sold till the third tender of September was 5.13 lakh tonnes only. Similarly, FCI offered a quantity of 8.77 lakh tons of rice for sale through e-auctions but barely 4.12 lakh tonnes sold till the third tender in September.
There are two main reasons due to which FCI has not able to sell the surplus wheat and rice in the domestic and international markets.
First, the prevailing prices of wheat and rice within the country and outside are not conducive. The market prices of these two commodities are much lower than the economic cost of FCI. For instance, the economic cost of wheat and rice is budgeted at Rs 2505.67 and Rs 3601.91 per quintal respectively. Whereas, the market rate of wheat and rice are around Rs 2,100 and Rs 3000 per quintal respectively, depending on the varieties. The average wheat price in the international market in September was somewhere around $190 to $202 per tonne. In case of rice, it was around $427 per tonne for Thai 5% broken, which is closest to Indian rice.
Second, there are some provisions in the WTO agreement on agriculture which impose certain restrictions on export from public stock holding.
“The wheat and rice procured for the central pool at MSP (minimum support price) and available with the FCI constitute a public stock holding and, therefore, certain restrictions have been imposed on exports to foreign countries from such public stock holding as per provisions of the agreement on agriculture under WTO,” sources said. “Such exports are allowed in fully grant form to foreign countries subject to certain conditions of the WTO,” sources said.