Govt trims open market sale price of rice
New Delhi: The Union government on Wednesday decided to lower the base price of rice being auctioned by the Food Corp. of India (FCI) under a scheme for bulk buyers, millers, processors and traders, after receiving muted response in the six auctions held so far.
On 5 July, the government had set a reserve price of ₹3,100 per quintal for rice under the so-called open market sale scheme domestic (OMSS-D), which did not find many takers given that it was priced above market rates.
Buyers on Wednesday picked up only 1,500 tonnes, and a total of 495 tonnes in the previous five auctions, prompting government to cut the base price by ₹200 a quintal. The new reserve price will take effect from next week’s auction.
“Keeping in view the experience of the past five e-auctions for rice by FCI, it has been decided that the reserve price will be brought down by ₹200 a quintal and the effective price now will be ₹2900 per quintal,” Union food and public distribution secretary Sanjeev Chopra told reporters.
“The cost on account of reduction in the reserve price will be borne from the Price Stabilization Fund (PSF) maintained by the Department of Consumer Affairs,” he added.
FCI’s rice has about 25% broken grain and was costlier than the market price of ₹28-29 a kg, which made it unattractive for traders.
The government on Wednesday also decided that FCI will offload 5 million tonnes (mt) of wheat and 2.5 mt of rice in a phased manner under OMSS. This is in addition to previous plans to auction 1.5 mt wheat and 500,000 tonnes rice.
FCI has so far sold 821,000 tonnes of wheat in seven e-auctions since 28 June. Average bid price for wheat under OMSS on Wednesday was ₹2,254.71 a quintal against the reserve price of ₹2,129.17. In the case of rice, the average bid price was ₹3,163.53 per quintal against the reserve price of ₹3,162.03.
The auctions aim to signal to the market that the government has sufficient has foodgrains stock, which will be used to bring down prices, the food secretary had said on 10 July.
Wheat prices have gone up by 6.77% in the retail market and 7.37% in the wholesale market in the past one year. Similarly, rice prices have shot up by 10.63% in the retail market and 11.12% in the wholesale market during the same period.
Retail inflation in rice in June climbed to 11.8% from 11.5% in May and 3.2% a year earlier.
The staple grain has a weightage of 4.7% out of cereals and products basket’s 9.7% in the Consumer Price Index.
“In view of the benefit of over 140 crore citizens, the Union government has taken this decision to offer wheat and rice under OMSS(D) to private parties for increasing availability, moderate the rise in market prices and control food inflation. However, it is relevant to mention that the government is also providing food grains to National Food Security Act beneficiaries as per their entitlement free of cost as committed under Pradhan Mantri Garib Kalyan Anna Yojna (PM-GKAY) w.e.f. 1 January 2023,” an official statement said.
As on 8 August, FCI had stocks of 24.6 mt rice, including stock in transit as against the buffer norm of 10.2 mt as on 1 October. It has nearly 28 mt wheat against the 20.5 buffer norm, people familiar with the matter said.
Stocks are offloaded under OMSS from time to time to dispose of excess stocks, reduce the carrying cost of foodgrains, enhance supply of foodgrains during lean season in deficit regions and moderate market prices. In the current calendar year, wheat and rice are being offloaded by FCI in a phased manner as per reserve prices fixed by the Union government.
