In its effort to ease the pressure on the front of foodgrain storage as monsoon advances, the government on Tuesday decided to distribute an additional eight million tonnes (mt) of the stock through ration shops and sell those directly in the open market to bulk consumers.
The grain will be sold at prices much lower than their cost of procurement.
The measure, which is expected to further inflate the annual food subsidy by around 10,000 crore during the current financial year, was necessitated after a high-powered committee headed by Prime Minister’s Economic Advisory Council Chairman C Rangarajan favoured distributing additional quantities through the public distribution system (PDS) to absorb excess stocks.
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The latest Union budget has pegged annual food subsidy for 2012-13 at Rs 75,000 crore.
On Tuesday, an empowered Group of Ministers (eGoM) met under the chairmanship of finance minister Pranab Mukherjee. It, according to a senior official who participated in the meeting, has decided to allocate an additional five mt of wheat and rice to states for distribution to families below the poverty line (BPL) families and three mt of only wheat for sale in the open market.
“No fresh allocation has been made for APL (above the poverty line) families, but an old allocation of one million tonnes has been revived,” he told reporters.
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The meeting was also attended by agriculture minister Sharad Pawar and food minister K V Thomas. Today’s extra allocation is over and above the annual PDS allocation of 55 to 56 mt of foodgrain.
Under the PDS, the government distributes 35 kg of wheat and rice every month to BPL families at cheap rates. While the wheat is sold at Rs 4.15 per kg, the price for rice is Rs 5.65. As for APL card holders, 15-35 kg of grains is distributed every month — also at cheap rates.
The country’s foodgrains stocks as on June 6 is estimated to be over 82 mt, which is almost 10-12 mt more than that of last year. The stocks are far above the available storage space of around 66 mt.
Experts say that if immediate steps are not taken to liquidate the grain inventory in the central pool, then huge quantities of grains will run the risk of getting damaged during the monsoon.
To avoid such a calamity, the food ministry is working on a slew of proposals, which also include subsidised export of grains and export of value-added wheat products like flour.
The Rangarajan-led high-powered panel had suggested distributing an additional 13 mt of grains through ration shops and export of two mt to wean away the excess inventories.
Officials said the eGoM has decided to sell wheat in the open market at Rs 1,170 per quintal till September, following which it would be raised to Rs 1,285 per quintal.
“This is good price,” said a senior official from a multi-national agro-commodity trading company.
“However, given that Indian wheat is selling at around Rs 1,320 per quintal in the global markets, there could be a possibility of diversion of the government’s own wheat from open market to export.”