States, UTs allowed to buy rice from Food Corp of India at a cheaper price; Karnataka likely to benefit

New Delhi: The government on Thursday allowed states and union territories that do not produce enough grain to meet their requirements to buy cheaper rice directly from the Food Corporation of India (FCI) without having to go through electronic auctions.

In addition, the sale of cheap atta and rice under the government's ‘Bharat’ brand, which was slated to run till 30 June will continue after that date.

The move comes against the backdrop of huge stocks of graIn lying in government godowns and expectations of a bumper harvest as a result of extensive monsoon season sowing. 

This decision to allow purchase of rice directly from the FCI follows tepid demand for grains sold under the Open Market Sale Scheme (OMSS). It is expected to benefit Karnataka, which was stopped from buying rice directly from FCI as well as under OMSS by the Union government last year.

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Under OMSS, the government fixes the price of rice and wheat and sells them to bulk buyers such as states and private millers through e-auctions. Under the new plan the FCI will sell rice to state governments at ₹2,800 per quintal from next month as against ₹2900 earlier.

‘Decision taken to reduce huge surplus of stocks’

"The decision in this regard is taken to reduce the huge surplus of stocks before the new procurement season begins,” said Pralhad Joshi, the Union minister for consumer affairs, food and public distribution.

On June 25, Mint reported that the government is considering allowing such a move.

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As of 26 July, the combined sown area of key crops—including paddy, pulses, oilseeds, and sugarcane—reached 81.1 million hectares (MH), or 74% of the normal sown area, marking a 2.2% increase compared to the previous year.

Paddy was sown across 21.5 MH, compared to the normal sown area of 40.15 MH. The area under pulses, such as tur, urad, and moong, saw a significant rise of 14% to 10.2 MH year-on-year, which is expected to boost pulses production in the 2024-25 season.

“If the states/UTs want to procure more than the stipulated 5 kg of free grain per individual, then they can procure that at the same price at ₹2,800 per quintal instead of earlier ₹2,900 per quintal,” the minister said.

Currently, the FCI holds 45.57 MT of grain, comprising 32.68 MT of rice stocks and 12.89 MT of grain receivable from millers, against a buffer requirement of 10.25 MT for 1 October.

The government aims to reduce this surplus of rice stocks before the start of the new procurement season for 2024-25 that usually starts from 1 October.

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Last year, the Karnataka government, which is ruled by the Congress party, requested 0.22 MT of rice from the FCI to distribute to all BPL families in the state, providing 10 kg per family per month under the Anna Bhagya scheme. Although the FCI initially agreed to supply the requested amount, the Union food ministry later cancelled the allocation.

During the last fiscal year, the government's initiative to sell rice to bulk buyers such as rice millers through weekly e-auctions saw a limited response from the traders because of high prices. Only 0.19 MT of rice was sold through the OMSS to bulk buyers at a price of ₹2,900 per quintal.

Usually, the government procures about 12.5-15 MT of surplus rice each year, which is then distributed through the Public Distribution System (PDS), other welfare schemes, and the OMSS, which is controlled by the government.

However, over the past two years, the government has found it difficult to find buyers due to the high prices set under the OMSS.

Additionally, the government added 16 new commodities to the Price Monitoring System (PMS). The updated list now includes ragi, jowar, bajra, suji, maida, besan, eggs, desi ghee, pasteurized butter, bananas, and five powdered spices—black pepper, coriander, cumin seeds, red chillies, and turmeric.

With this addition, the total number of commodities monitored for price changes has risen to 38.

Previously, the PMS monitored rice, wheat, atta, milk, gur, various dals, oils, vanaspati, sugar, tea, salt, potato, and tomato. The minister explained that this expansion aims to facilitate earlier intervention to manage food inflation and market volatility. 

The minister also stressed that custom-milled rice has been replaced with fortified rice across all government schemes, and 100% distribution of fortified rice is set to be achieved by March 2025. “It will help in tackling anemia and nutritional deficiencies," he said.