Despite storage shortages, FCI sticks to rice buy target

Despite criticism for procuring foodgrain without creating adequate storage, Food Corporation of India plans normal procurement this kharif season.

FCI chairman Siraj Hussain told Business Standard the government-owned agency had no plan to go slow on buying paddy at the minimum support price announced for this season.

According to trade sources, FCI procured nearly 30.8 million tonnes rice out of the country's total output of 75.9 mt last season.

It bought 22.5 mt wheat out of the total output of 79 mt.

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As on September 1, FCI held 20.5 mt rice and 29.9 mt wheat. One-third of all this is in the open.

The storage is sufficient to meet the annual intake through the ration shop chain, the public distribution system.

Analysts estimate nearly 10 mt grain got spoilt last season due to shortage of warehousing space.

The result was an order from the Supreme Court to distribute grain among the poor for free or at a nominal charge. Prime Minister Manmohan Singh has publicly said this is not practical.

Recently, FCI refused to buy the PAU-201 variety of hybrid rice, with an estimated output of around 1.6 mt in Punjab, due to black spots on the grain.

This left a question in farmers' minds about how FCI will procure this season.

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The rice output is estimated to remain range-bound this year despite higher acreage. Madan Sabnavis, chief economist of Care Ratings, forecast rice output at 76 mt as against 75.9 mt in the previous season.

If FCI procures anywhere close to 30.8 mt, like last year, there will be a shortage of grain for the open market, which may trigger a rise in prices.

Data compiled by the agriculture ministry show rice sowing increased by 660,000 hectares (ha) to 39.51 million ha this kharif season.

Favourable monsoon in the north raised prospects but drought in the east and northeast during the early sowing season has lowered the overall output forecast.