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Storage crisis looms as govt’s food grain stock set to hit new high

Thursday, Feb 13 2020


The government, which is laying down plans for wheat procurement for the new season, could be staring at a storage nightmare by the end of June, as its stocks are seen surging to a record high.The government's initial estimates peg Jul 1 food grain inventory at 96.0 mln tn, more than double the buffer requirement of 41.1 mln, senior government officials said. They said the inventory could be even larger, as the wheat procurement estimate considered for the stock position is 36 mln tn, which is conservative considering the crop size.The government is yet to release its output estimate for wheat this year. A Cogencis poll of 15 market participants pegged wheat output in 2019-20 (Jul-Jun) at a record high of 108.0 mln tn, up 6% on year.


If production does increase to this level, procurement could easily touch a record high of 40 mln tn.Such a sharp increase in stock could pose a problem of storage, as the government's current storage capacity is just 87.8 mln tn, inclusive of storage available with central and state warehousing corporations.Anticipating a storage crisis, the government has already floated tenders for creation of temporary 'covered and plinth' storage of 9 mln tn in four key wheat-procuring states–3.5 mln tn in Punjab, 2.5 mln tn in Madhya Pradesh, 2.0 mln tn in Haryana, and 1.0 mln tn in Uttar Pradesh, one of the officials said."Wheat can be stored in covered and plinth but rice can not be stored in the open. So we have asked these four states to create more storage space," one of the official said.In Punjab and Haryana–the two largest contributors of wheat to the central pool–granaries are already full. As on Feb 1, Haryana had 10.3 mln tn of grains while Punjab had a whopping 20.2 mln tn.  


Food Corp has been asked to move out as much grain as possible out of these two states to make space for fresh procurement. The government has been desperately looking for ways to liquidate stocks from central pool. To reduce stocks it has reduced the base price of wheat and rice auctioned at its weekly auction plan–open market sale scheme. However, the reduction in prices have failed to yield expected result and pushed the government's Feb 1 food grain stocks to a seven-year high of 57.8 mln tn.It has also been toying with ideas of limiting procurement of food grains or increasing the food grains quota allocated to beneficiaries of the national food security plan for a limited period of time.



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