The Union government is planning one of the biggest foodgrain-procurement operations in 2023-24 to bolster food security, according to officials, a policy that analysts say pivots the focus back from exports of farm produce.
Geopolitical uncertainties, global supply-chain disruptions due to the knock-on effects of the pandemic, and depleted state-owned cereal stocks are the main reasons for expansion of procurement, which refers to the government’s purchases of foodgrains at benchmark floor rates known as minimum support prices (MSP), one of the officials said.
“The country’s own food security comes first,” a second official added.
Currently, federally held cereal stocks are at a six-year low after extreme weather crimped wheat output in 2022-23 by 2.5% to 106 million tonne. This prompted an export ban in May 2022. A patchy monsoon also shriveled rice crops, prompting the government to impose curbs on overseas shipment.
The government has asked the Food Corporation of India (FCI), the Centre’s main grain-handling arm, to work with states to increase procurement centres, which are essentially aggregation points of purchase where farmers sell to the government. Some states make their own procurement to distribute grains on behalf of the Centre, handing over any surplus to the FCI.
Food minister Piyush Goyal has called for a ramping up of FCI centres and warehouses in states where they have been traditionally weak, such as Uttar Pradesh, which he toured this week. States such as Punjab and Haryana have a widespread procurement network.
“This signals a policy of focusing on the country’s food security, which in recent years had shifted to exports because of back-to-back bumper harvests,” said Arun Aggrawal of Comtrade.
The budget 2023-24 has allocated ₹1.97 lakh crore for the food subsidy bill, but it also reckons that this could be insufficient. Finance minister Nirmala Sitharaman has said at various forums that the Centre is committed to make good any shortfall. So, the final expenditure on food handouts (known as revised estimates) is expected to be higher.
FCI will therefore have to resort to “internal and extra budgetary resources (IBER)” – or borrowing and cash advances — due to the expansion of procurement, the first official said. Budget documents have already indicated to what extent it expects FCI to borrow, pegging it at ₹1.45 lakh. The budget has allocated ₹1.45 lakh crore for the food security bill.
“Pending its receipt, FCI manages its working capital” through IBER, the food ministry said in a statement last week. In a clean-up act, the Union government paid off the FCI’s ballooning debt of ₹3.39 lakh crore in 2020-21.
