Economy

India’s Bumper Wheat Crop Should be Giving Jitters to the Food Corporation of India

Simply put, FCI and state agencies are not equipped to safely store such a large quantity of additional stock of wheat.

The Rabi crop of wheat will start arriving in India’s mandis in another three weeks. By the time we reach Baisakhi on April 13, the mandis will be flooded with wheat arrivals.

The agriculture ministry’s second advance estimates of production of foodgrains, released on February 18, has projected a record high production of 106.21 million tonnes of wheat. Untimely rains in March may have caused damage to wheat crop in some areas but India is on track to harvest a record wheat crop.

This, unfortunately, will likely be giving jitters to the officers of the Food Corporation of India (FCI) and government officials in major procuring states of Punjab, Haryana, UP and MP as they will have to procure and safely store this wheat for at least the next three years.

While good storage practices can result in safe storage of wheat for up to four and even five years, FCI had decided that it should not have wheat stock older than three years and rice stock older than two years.

On February 1, 2020, FCI had 103.50 lakh tonnes while state agencies had 197.07 lakh tonnes of wheat. Out of total wheat stock of 300.66 lakh tonnes, 4.27 lakh tonnes belong to crop year 2016-17, so it is more than three years old. The government has 87.45 lakh tonnes of wheat from crop year 2017-18, that is, more than two years old. About 209 lakh tonnes of wheat from the crop year 2018-19, procured last year, was still in stock.

Similarly, the government is holding rice stock of crop year 2017-18 (1.83 lakh tonnes), 2018-19 (153.71 lakh tonnes) and 2019-20 (114.56 lakh tonnes, procurement will continue till September 2020).

Last year, procurement of wheat and rice was 341.33 and 443.31 lakh tonnes respectively. Due to a bumper crop of wheat, procurement this year may be even higher than last year.

Simply put, FCI and state agencies are not equipped to safely store such a large quantity of additional stock of wheat and rice.

FCI has 382.27 lakh tonnes of storage capacity in the form of covered godowns. State agencies have 238.17 lakh tonnes of covered godowns. Thus the total storage capacity in the form of scientific, covered godowns where food grains can be safely kept is only 620.44 lakh tonne. In addition to this, FCI and state agencies have 26.07 and 106.09 lakh tonnes of covered and plinth (also called CAP plinths) storage capacity. This capacity is primarily located in Punjab (68.28 lakh tonnes) and Haryana (32.83 lakh tonnes). For rice, only covered storage godowns can be used while wheat can be stored in CAP, if there is a shortage of covered godowns.

Also Read: Budget 2020: Does the Govt Intend to Reduce Coverage Under the Food Security Act?

Scientific CAP storage requires elevated plinths of concrete on which wooden crates are kept to keep bags of wheat. Wheat stacks have to be properly covered with low-density black polythene covers which are waterproof. Nylon ropes and nets are used to tie them to prevent seepage of water. For aeration, the covers have to be removed periodically.

Ideally, wheat stored in CAP should be moved out to consuming districts as soon as possible but FCI has to sometimes move out wheat stored in covered godowns if it belongs to older crop years.

It is not that the government has not done anything to increase the storage capacity for stocks. In fact, the government in 2015-16, approved the creation of 100 lakh tonne of steel silos in which wheat can be stored in bulk. Transportation of wheat from these silos can also be done in bulk in specialised railway rakes. This eliminates the use of gunny bags and reduced losses in storage and transportation.

However, like most other infrastructure projects in India, progress has been tardy and only 6.25 lakh tonnes silo capacity has been completed.

Representative image. Photo: Reuters

A more successful intervention of the government was construction of modern godowns by the private sector on guaranteed rent payment for 10 years, under the Private Entrepreneurs Guarantee (PEG) scheme, launched in 2008. Out of 149 lakh tonnes of additional storage capacity sanctioned, 142.83 lakh tonnes has been completed. If this was not done, it would have been impossible to manage record high procurement in 2018-19 and 2019-20.

On March 1, 2020, about 54 lakh tonnes of wheat is kept in CAP storage, out of which about 18 lakh tonnes is in unscientific CAPs. The economic cost of wheat under CAP is Rs 1,446.66 crore.

Due to shortage of scientific CAP plinths, by the end of June, when wheat procurement is almost over, there may be about 50 lakh tonnes kept in unscientific CAPs. In the past, wheat kept in some such CAP plinths was damaged in rains. Since these plinths are generally hired by state agencies, the state governments (and not the FCI and the centre) have to bear the losses due to damage. It is a sore point between Punjab and the centre.

So, what is the way out of this imbroglio which repeats every few years?

Firstly, the government should make up its mind whether and how long it wants to continue its policy of open ended procurement of wheat, rice (and pulses too) at minimum support price (MSP). If the government wants to continue with the existing system for another decade, it should fast track construction of 100 lakh tonnes of steel silos which have already been sanctioned and are at different stages of implementation. According to the original plan, this was to be achieved by 2019-20 but we are nowhere near it.

Secondly, if the government plans to move to direct support instead of physical procurement of grains, large addition to storage capacity may not be required in procuring states. In this scenario, some of the existing capacity may also have to be hired out in major procuring states like Punjab and Haryana.

One of the objectives of NITI Aayog is to design strategic and long term policy. The government will do well to consult NITI Aayog and come up with its vision of food grain management over the next ten years.

The visuals of damage to grains due to rains are extremely disturbing to the common man. In 2020, one can only hope that such images are not repeated on TV channels.

Siraj Hussain is visiting senior fellow ICRIER. He was Union agriculture secretary and CMD, Food Corporation of India.