Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

Why govt must create a buffer stock of all main food items? 


From UPSC perspective, the following things are important :

Prelims level: NAFED, Open Market

Mains level: How Buffer in Chana Helped

Why in the news? 

Sales of wheat and chana in the open market have effectively curbed soaring inflation in cereals and pulses.

What is an Open Market?

  • An open market is an economic system with little to no barriers to free-market activity. An open market is characterized by the absence of tariffs, taxes, licensing requirements, subsidies, unionization, and any other regulations or practices that interfere with free-market activity. Open markets may have competitive barriers to entry, but never any regulatory barriers to entry.

Present State of Inflation:

  • Overall CPI Inflation: Stood at 4.75% year-on-year in May, the lowest in 12 months, but food inflation remained elevated at 8.69%.
  • Cereals and Pulses: Inflation rates were 8.69% for cereals and 17.14% for pulses in May 2024.
  • Impact of Buffer Stocks: Buffer stocks of wheat and chana moderated inflation by ensuring sufficient supply during periods of price volatility.

How Buffer in Gram(Chana) Helped:

  • NAFED Procurements: Procured large quantities of chana during surplus years at MSP, preventing prices from soaring during crop failures.
  • Distribution: Sold chana through various channels including open market e-auctions and ‘Bharat Dal’ at subsidized rates, stabilizing prices for consumers.
  • Current Stock Levels: Despite recent sales, NAFED still maintains a buffer stock of 4.01 lakh tonnes of chana as of now.

Significant Role Played by FCI:

  • Wheat Offloading: FCI offloaded a record 100.88 lakh tonnes of wheat in fiscal 2023-24 through open market sales, stabilizing prices and reducing inflation.
  • Retail Price Management: Sales under schemes like ‘Bharat Atta’ ensured wheat and cereal inflation was reduced from peak levels earlier in 2023.
  • Buffer Management: Despite reduced stocks from previous years, FCI’s interventions have been crucial in managing price volatility in essential commodities.

Need to Adopt Buffer Policy and Better Procurement:

  • Buffer Stock Strategy: Proposal to expand buffer stocks beyond rice, wheat, and select pulses to include oilseeds, vegetables, and even milk powder to mitigate price spikes.
  • Enhanced Procurement: Advocates for increased procurement during surplus years to build adequate buffer stocks for future market stabilization.
  • Policy Impact: Buffer stocking can moderate price volatility influenced by climate change-induced agricultural uncertainties, benefiting both consumers and producers.

Way forward: 

  • Enhanced Diversification of Buffer Stocks: There is a need to diversify buffer stocks beyond traditional items like rice and wheat to include a broader range of essential commodities such as oilseeds, vegetables, and milk powder. This expansion would help in better managing price spikes and supply shocks across various sectors.
  • Strengthened Procurement Mechanisms: Improving procurement strategies during surplus production years is crucial. This involves proactive measures to purchase larger quantities of commodities at minimum support prices (MSPs), ensuring adequate buffer stocks for future market stabilization and price moderation during scarcity periods.

Mains PYQ: 

Q Food Security Bill is expected to eliminate hunger and malnutrition in India. Critically discuss various apprehensions in its effective implementation along with the concerns it has generated in WTO. (UPSC IAS/2013)

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