The Food Corporation of India (FCI) is a statutory body established in 1965 under the Food Corporations Act of 1964. Its primary responsibility is to manage the food security system in India. The corporation maintains buffer stocks of food grains, like rice and wheat, for times of scarcity or crisis. Furthermore, FCI handles the distribution of foodgrains throughout the country for public welfare.
One essential program conducted by the FCI is the Open Market Sale Scheme (OMSS). This scheme serves as a platform to sell surplus food grains from the central pool in the open market. In essence, the OMSS primarily aims to enhance food grain supply during lean seasons, control inflation through moderating prices, ensure food security, and facilitate the sale of surplus food grains.
Implementation and Process of the Open Market Sale Scheme
The OMSS process involves conducting e-auctions by the FCI. Traders, bulk consumers, and retail chains are allowed to purchase specified quantities of food grains at predetermined prices. States are also granted the opportunity to procure additional food grains through OMSS for distributions under the National Food Security Act, 2013 (NFSA).
Furthermore, these auctions are held weekly for wheat on the platform of the National Commodity and Derivatives Exchange Limited (NCDEX), a major commodity exchange platform in India.
Recent Revised OMSS Restrictions
The Open Market Sale Scheme recently underwent some revisions. The main point of change was limiting the quantity that a single bidder can purchase in one bid. Previously, the maximum quantity per bid stood at 3,000 metric tonnes. Currently, this has been reduced to quantities that range between 10-100 metric tonnes.
This revised scheme primarily aims to promote wider participation by accommodating small and marginal buyers and encouraging competitive bids from them. The intent is to curb retail prices and foster a more leveled playing field.
Discontinuation of OMSS Sales to States and Reaction
The Central government has discontinued the sale of rice and wheat from the central pool to state governments under the OMSS. This prohibition extends to private bidders as well, who are now denied the opportunity to sell their OMSS supplies to states.
This development is designed to control inflationary trends while ensuring adequate stock levels in the central pool. The move seeks to streamline the distribution and allocation of food grains by ensuring that food security obligations are met. However, this decision has been criticized by some states, particularly Karnataka and Tamil Nadu.
In response, Karnataka temporarily replaced its free grain distribution scheme known as the Anna Bhagya Scheme with cash transfers to beneficiaries due to its inability to procure enough rice in the market at a reasonable cost and in time to meet the requirements of the scheme.
FCI’s Role in Public Distribution System
Apart from managing the food security system and running the OMSS, FCI also plays an essential role in the country’s public distribution system. Here, FCI resorts to e-auction as one method to dispose of surplus food grains.
The beneficiaries of these food grains distributed by FCI primarily include families falling under the category of ‘below poverty line’ (BPL). Additionally, pregnant women and lactating mothers are also provided with take-home ration as deemed necessary by the National Food Security Act, 2013.
Debate Regarding Price Subsidy and Direct Benefit Transfer
There has been ongoing discussion on the potential benefits and drawbacks of replacing price subsidy with Direct Benefit Transfer (DBT). This method could potentially alter the scenario of subsidies in India. Advocates for DBT argue that it can result in greater efficiency and transparency in the distribution of benefits. However, opponents point out that DBT could also lead to exclusion errors, especially in rural and less digitalized areas.
