Government Declares a Sharp Reduction In Reserve Price of Rice And Wheat

To help Food Corporation of India (FCI) in unloading the bulk of its stock, the government has sharply reduced the reserve price of rice and wheat. FCI had been planning to sell a serious amount of its rice stock in the open market, allegedly, to accommodate fresh procurement of paddy and wheat.

In the Open Market Sale Scheme (OMSS), the price of rice has gone down from Rs 2,785/quintal to Rs 2,250/quintal.  As for the price of wheat, it is now Rs 2,135/quintal.

Even earlier, the reserve price of both rice and wheat, was quite lower to the economic cost of FCI. Now, with the lower prices, this gap has increased further. And now the economic cost of wheat and rice for FCI, including MSP, cost of logistics, storage, handling and distribution, will be Rs 2,505/quintal and Rs 3,601/quintal respectively.

As mentioned earlier, this decision has been taken due to the excess stock of rice and wheat with FCI. The corporation is also running out of space for new crops to be procured. As per the data, the stock of rice was 237.15 lakh tonnes and the stock of wheat was 327.96 lakh tones, as of January 1, 2020. While only 76 lakh tonnes of rice and 138 lakh tonnes of wheat are required as per the buffer stock norm, huge tonnes of unmilled paddy are also lying in the godown. So, reduction in the prices can help FCI with this issue to a great extent. The poor demand for rice and wheat in the open market is also a reason why the government has cut prices.

During 2019-20, the government planned to sell about 10 million tonnes of wheat in OMSS but could only sell 9.7 lakh tonnes till November 2019, as per data.