In order to ensure food security and prepare for unforeseeable situations like drought, starvation, conflicts, etc., the public sector in India maintains Buffer stocks. What are buffer stocks? How do they affect food security? What are the challenges faced by it? Read the article to know more about the issues of Buffer stocks and food security.
Buffer stocks refer to a collection of certain commodities like rice, wheat, etc. In India, the stocking of food grains was first implemented during the 4th Five Year Plan in 1969. In order to carry out the objectives of the Food Policy, the Food Corporation of India was established in 1964 under the Food Corporation Act.
The objective of Buffer stocks
The following are the major goals for maintaining India’s public sector food grain buffer stocks:
Farmer returns that are higher
The purchase of food grains from farmers at the Minimum Support Price (MSP) relieves them of the need to sell their goods at a loss and guarantees them a fair return on their investment.
To meet the objective of supplying every Indian person with sufficient food for their sustenance, or preserving food security, buffer stocks of food grains are maintained.
Whenever the cost of food supplies increases, buffer stocks are released onto the market to drive the cost to a reasonable level. This was part of the government’s effort to maintain food inflation within reasonable bounds.
The buffer stocks also assist the government in implementing its social welfare programs for the needy and poorer segments of society.
Food grains for welfare programs
The government’s social welfare programs, such as the Targeted Public Distribution System (TPDS) and Other Welfare Schemes (OWS), such as the mid-day meal program for school-age children, the distribution of food to those who have been displaced by natural disasters, etc., are made possible by the food stock procurement.
The minimal amount of food grains that the central government must keep on hand at the start of every quarter to ensure adequate supplies for the public distribution system and other government distribution programmes.
Food Stock held by the following entities is accessible in the central government’s pool: State Government Agencies (SGAs) States participating in the Decentralized Procurement Scheme Food Corporation of India (FCI)
Throughout the year, food grains from the Central Pool are dispersed based on patterns in off-take and procurement. As a result, a key component in determining the minimum food grain reserves needed in any given quarter of the year is the season of production and procurement.
The GoI’s current buffer stock stocking standards include the following:
- Operational Stocks: The quantity of stock needed to satisfy TDPS and OWS monthly requirements.
- Food security stocks: The supplies on hand to cover any gaps in purchasing.
Operational stock refers to the food grains used for OWS and TDPS distribution, whereas operational stock and buffer stock both refer to the surplus. The stock over the minimal stockpiling standards is considered excess stock. It is occasionally exported, given to select states in additional allocations, or sold on the open market.
Challenges of Buffer stocks
- High Cost of Logistics and Administration: The Agricultural Ministry and FCI have difficulty adjusting the budget to make money available for the effective creation and operation of the storage units because the majority of the funds are allocated for purchasing the buffer stocks. These examples show how this is possible:
- Dual Wastage: In India, a significant portion of the population is dying from hunger while at the same time, enormous amounts of food inventories degrade due to improper storage techniques.
- Issues with warehousing include a lack of adequate storage space and other infrastructure following the purchase.
- Wastage: In open, outdoor storage, rats, frost, and rain frequently cause the food grains to spoil, costing the government a great deal of money.
- Transportation problems: Moving grains to and from the FCI godowns is quite expensive. The losses are also increased by spills and deterioration that occur during shipment.
- Diversion and theft: The buffer stockpiles may occasionally be taken and given to ghost recipients, alcoholic beverage manufacturing facilities, and illicit markets. By doing this, a large portion of the population is starved while others gain from the buffer stockpiles of food grains in place of the target population.
- The practice of trade distortion: Many Western industrialised nations view the government’s purchase of food grains and upkeep of buffer stockpiles as a trade-distorting activity. Regarding the same, they drag India to the WTO.
- A skewed pattern of crop output results from integrating buffer stocks with MSP for staple grains like rice and wheat. These crops require a lot of water to grow, so more fertiliser needs to be applied for them to be more productive. This compromises the nutritional security of India by impacting crop diversity in addition to the environment. Farmers who live in areas where it is difficult to grow rice and wheat will likewise be more likely to grow rice and wheat.
- Open-Ended Procurement: The open-ended procurement of the food stocks further complicates the proper storage and consumption of the buffer stocks in the absence of an accurate estimate of the overall buffer stock needed to run the PDS and in emergencies.
In order to enhance FCI’s financial management and operational effectiveness in the purchase, storage, and distribution of food grains, the government established the six-person Shanta Kumar committee. The committee’s recommendations included restructuring or unbundling FCI. Important suggestions made include the following:
- Reduce from the present 67% to 40% the number of recipients under the National Food Security Act.
- Permit the private sector to buy and store grains of food.
- The minimum support price (MSP) and food subsidy amounts can be directly transferred to the accounts of farmers and food security beneficiaries if bonuses on MSP payments made by governments to farmers are stopped and a direct benefit transfer system is adopted.
- Only in states with weak procurement capabilities could FCI engage in full-fledged grain procurement.
- States should handle procurement in the cases of conditions that are performing well, such as Haryana, Punjab, Andhra Pradesh, Chhattisgarh, Madhya Pradesh, and Odisha.
- Eliminating levy rice is the term for the rice that the government compulsorily purchases from the mills under the levy rice programme, which ranges from 25 to 75% in different states. Only the remaining may be sold by mills on the open market.
- De-regulate the fertiliser industry and give farmers a cash subsidy for fertiliser of Rs 7,000 per hectare.
- Grain outsourcing: The committee urges the implementation of a negotiable warehouse receipt (NWR) system.
- Farmers can deposit their produce in these authorised warehouses under the new arrangement, and the bank will advance them 80% of the MSP value of their produce.
- Clear and open buffer stock liquidation procedures: FCI should be given more freedom to conduct business; when needed, it should sell surplus goods on the open market or export.
Article Written By: Atheena Fathima Riyas