Govt of India stocks DOUBLE what it needs as food prices cripple consumers

The Govt of India has an unholy problem of plenty on its hands. The Food Corporation of India's (FCI) stocks of wheat and rice have risen to a never-before high of 610 lakh tonnes, nearly twice the amount required under safe buffer norms

According to government norms, 319 lakh tonnes of foodgrain must be kept in the Central pool to meet the buffer stock as well as strategic reserve requirements.

On July 1,2014 these stocks stood at 610 lakh tonnes. FCI godowns have no space left, and foodgrain is being stored in the open under plinth and temporary cover.

The travesty that figure represents in a country plagued by pervasive poverty is made even worse by the rising prices of wheat and rice in recent months

In other words, the government holds more foodgrain than it can, while the poor are squeezed more and more by the cost of basic foodgrains

The Bharatiya Janata Party, in its manifesto for the Lok Sabha elections 2014, rightly identified the FCI as a problem area in the fight against inflation, but after more than two months in power the government has not yet clarified how it plans to "unbundle the FCI''

The issue assumes vital importance as it will determine how efficiently Rs 115,000 crore worth of food subsidy is utilised. 

Budget 2014-15 contained brave words about a second technology-driven revolution, with focus on productivity and protein output. That, if realised, will only make the grain storage worse

Official figures show that food inflation touched 9.5 per cent in May from 8.64 per cent in April, pushing the Wholesale Price Index to a five-month high

Inflation dipped in June, but the price of cereals (wheat and rice) maintained its northward trajectory, with rice up by 10.25 per cent despite the abundant stocks 

The weak monsoon rains have also increased the risk of rising food prices. India's Consumer Price Index gives 50 per cent weightage to food items, and is thus overly sensitive to food price fluctuations

The Govt had on Friday July 25,2014 approved the sale of 100 lakh tonnes of wheat from FCI stocks in the open market in order to boost domestic supply and check prices

In 2013-14, the government had announced sale of 85 lakh tonnes of wheat but was able to sell only 58 lakh tonnes. Putting this in perspective is the unwholesome, and official, fact that the wholesale price of wheat increased to Rs 19 per kg in the national market in July, from Rs 16.10 per kg in the same month last year.

The slow movement of foodgrain by the FCI is a significant facet of what is a national problem.