Centre to have enough rice even at half of next season's procurement target

A few days back, the Central government set a target of procuring around 52 million tonnes of rice in the forthcoming season that will start from October 1. But analyses by traders and market sources show that even if the government procures half of the target by the end of March, it will still sit on a surplus at the end of the FY23 financial year i.e. March 31, 2023.

This surplus is after accounting for the distribution of rice through the regular public distribution scheme (PDS) and also the revamped Pradhan Mantri Gareeb Kalyan Ann Yojana (PMGKAY), in which Centre off late has started allocating more rice than wheat due low stocks of the latter.

As of August 16, the government has rice stocks of around 26.35 million tonnes in the Central pool. Plus, there is another 12.24 million tonnes of rice-equivalent of unmilled paddy lying with the millers. 

The monthly offtake of rice each month for PDS and PMGKAY after allocating extra rice in place of wheat is somewhere around 6-6.25 million tonnes, according to trade sources.

Possibility of good stock position should offer some salutary effect on prices and also a cushion to the government as it deliberates on various options to extend the PMGKAY beyond September or let it fade away.

However, the fiscal costs of extending the PMGKAY could be in excess of Rs 80,000 crore more than the subsidy budget of FY23 calculated when the free foodgrains scheme was extended for six months in April because the economic cost of rice is more than that of wheat.

Convincing the states to continue with the formula to distribute extra rice in place of wheat enforced in May 2022 to manage dwindling wheat inventories could also be a problem.

Already several of them, including those governed by the ruling Bharatiya Janata Party (BJP) have approached the Centre to revert to the old ratio between wheat and rice on the grounds that several of the ration card holders aren’t accepting rice in lieu of wheat in their states due to established feeding habits.

For the year 2021-22, total wheat distribution (PDS + PMGKY) was 43 million tonnes, while for rice it was 53 million tonnes for the same year.

This year (2022-23) based on the current allocations of PMGKY, traders are projecting 16 million tonnes to switch from wheat to rice.

In the case of wheat, though, the Centre won’t have any such cushion of stocks being hugely in excess of the buffer norm by the end of FY23 if it decides to go back to the old ratio of wheat and rice distribution.

Next wheat crop will start arriving in the market from April 1, 2023, while rice will start coming from October 1, 2022.

A clearer picture on rice will emerge once the new harvest starts hitting the market in the next few weeks. In the 2021-22 season, India produced around 111 million tonnes of rice in the kharif season.

Till then, the talk is that production might go down by a minimum six million tonnes and maximum 10 million tonnes this year due to drought-like conditions in the early part of the sowing season in several major growing states of UP, Bihar, Jharkhand, West Bengal and Odisha.

Rice procurement

The Central government has fixed a target to procure 51.8 million tonnes of rice during the forthcoming 2022-23 procurement season that will start from October, slightly more than the 50.98 million tonnes procured during the current season (2021-22).

According to an official statement, in addition to higher procurement of rice, the Centre also plans to purchase 1.30 million tonnes of coarse cereals from farmers next year, which is 117.4 per cent higher than the quantity procured in the current year so far.

The decision to procure more rice in the 2022-23 season than the current year was taken at a high-level meeting of the Central government with representatives of all major rice producing states that happened on Monday.

Rice sowing

Acreage of paddy, the main food grains grown during the kharif season continued to remain around 6 per cent less than the acreage during the same period last year as on September 2, 2022 and so far around 96.5 per cent of the normal area has been already covered.

Normal area is the average acreage of the last five years, which in case of paddy in kharif season is 39.70 million hectares.

But, given the fact that much of sowing has happened outside the ideal window and monsoon continues to play truant over eastern Indian states of Jharkhand, Bihar, UP and West Bengal, there is lots of uncertainty over the final output.

In some states like Jharkhand, the sowing is still woefully down and has reached just 50 per cent of normal area till September 02.  

However, the revival of monsoon in some states of eastern India since early August has pulled up sowing to some extent particularly in West Bengal and Bihar.

It has also cooled off prices, which was showing a rising trend since June due to delayed and insufficient sowing.