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Rice, wheat buffer stock move may push market prices up

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In a final push to the food security law, the Union cabinet on Thursday would consider a proposal to increase buffer stock of two vital food grains, rice and wheat, by about 60% for easy roll-out of the programme.

Such stocking may trigger an increase in prices of food grains in the open market.

The food security law was enacted in September 2013 and state governments have one year for implementing it.

The law provides for priority households (existing below poverty line) getting 5 kg of food grains per month, and Antyodaya (extremely poor) households 35 kg per month.

The combined coverage of priority and Antyodaya households should be 75% of the total rural population and 50% of the urban population.

The food ministry has proposed a change in regulations to maintain a minimum 150 metric tonnes of buffer stock in a year. As of now, the minimum buffer stock is 99.30 metric tonnes in a year.

The government maintains buffer stock on quarterly basis for operational and strategic purposes. The operational purpose is to provide food grains for the public distribution system (PDS) as per quota fixed for each state. The strategic stock is for meeting emergency situations such as droughts and natural calamities.

The food ministry has proposed a substantial increase in both operational and strategic stock. This is what could possibly affect open market prices.

With change in buffer stock requirement, the government will need an increase in capacity of silos to store additional food grains.

The cabinet has already approved a policy for public private partnership to build international quality silos. According to an official source, the response of private players to the policy has been poor because of “inflexible” norms.

The Food Corporation of India often faces criticism over its storage facilities and large amount of food stock going waste.

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