BUFFER STOCK, STORAGE ISSUES AND FOOD GRAIN MANAGEMENT

BUFFER STOCK, STORAGE ISSUES AND FOOD GRAIN MANAGEMENT IN INDIA

A buffer stock is a system under which government buys and stores stocks at times of good harvests to prevent prices falling below a target range, and releases stocks during bad harvests to prevent prices rising above a target range in order to neutralize the fluctuation in production of a given crop, so that the prices may remain stable.

Objectives/Advantages of Buffer stock

1. Better returns for Farmers: Procurement of food grains from farmers at MSP will help them get rid of the distress sale of their products and ensure reasonable return for their produce.
2. Food Security: The buffer stocks of food grains are maintained to achieve the goal of providing every Indian citizen with sufficient food for their sustenance i.e., ensuring food security.
3. Price stability: Whenever there is a rise in the prices of food stocks the buffer stocks are released into the market to bring down the prices to an acceptable level.
4. Social welfare program: It helps government carry out its social welfare programs for the poor and underprivileged sections such as TPDS, mid-day meal scheme etc.
5. Emergency use: Meeting emergency situations arising out of unexpected crop failure, natural disasters, etc.

Buffer norms

1. Food stocking norms: It refers to the level of stock in the Central Pool that is sufficient to meet the operational requirement of food grains and exigencies at any point of time. Earlier this concept was termed as Buffer Norms and Strategic Reserve.
2. Fixed by: The Cabinet Committee on Economic Affairs fixes the minimum buffer norms on quarterly basis every financial year.
3. Stocks: Presently, stocking norms fixed by Government of India on 22.01.2015 comprise of:
   • Operational stocks: For meeting monthly distributional requirement under TPDS and Other Welfare Schemes.
   • Food security stocks/reserves: for meeting shortfall in procurement.
4. Strategic reserve: In addition to buffer norms, Government of India has prescribed a strategic reserve of 30 lakh tonnes of wheat and 20 lakh tonnes of rice.
5. Stock held by: Food Stock available in the central governments’ pool is stock held by: State Government Agencies (SGAs), States which are taking part in the Decentralised Procurement Scheme and Food Corporation of India (FCI)

Challenges

1. Buffer stock related issues
   • Cost: Multiple costs are involved in procurement of grains by FCI for maintaining Buffer Stock, along with increasing MSP and food subsidy.
   • Open ended procurement: It strains the already burdened godowns, distorts food grain market and increases the debts of FCI [estimated to be 3.81 trillion rupees ($51.83 billion)].
   • Excess stock: Due to export bans, open ended procurement and no pro-active liquidation policy often results in excess stock.
   • Non-adherence to First in First out principle (FIFO): It mandates that the grain procured earlier needs to be distributed first. However, 126 LMT of food grains from 2008-11 was lying in the central pool even in March 2012 [CAG].
   • Counter-cyclical approach of inventory management: To meet the needs of government programs, government withholds stocks during a bad crop year and steps up its procurement, pushing up prices in an already constrained market.
2. Storage related issues
   • Inter-state disparity in storage facilities: Out of the total storage space, 64% was in the large procurement states like Punjab, Haryana, Andhra Pradesh, Uttar Pradesh and Chhattisgarh [CAG Report 2013].
   • Inadequate storage facility: There have been instances where the procured grains were stored in open silos. Also, the existing storage facility are poorly maintained causing grain damages due to pest attacks.
   • Higher storage costs and losses: FCI’s average annual rate of increase in storage capacity has been a meager 4.5% while the growth rate of rice and wheat stocks in the central pool has been more than 18%.
   • Increasing stock with FCI: Total grain stock in the Central pool stood at 82.18 mt as on February 1, 2021 compared to 75.17 mt a year ago.

Way Forward [Recommendations of Shanta Kumar Panel]

1. Storage Reforms:

• Outsource: To outsource grain storage function to Centre Warehousing Corporation, State Warehousing Corporation and Private Sector Players.
• Private Entrepreneur Guarantee (PEG) scheme: In order to construct go-downs, cold storage and other infrastructure based on PPP.
• Storage in silos: Instead of gunny bags along with mechanized/robotic assemblies with the help of private sector.
• End to end computerization and online tracking: Of entire system from procurement to retail distribution.
• Ration to poor: Immediately after the procurement, give 6 months’ ration to poor beneficiaries, which clean grain bins for storage in order to reduce amount of grain in godowns.
• Storage in north-eastern states and Jammu Kashmir: They should create storage capacity that can last for 3 months.
• Outsource of stocking of grains: Setting up of negotiable warehouse receipt (NWR) system where farmers can deposit their produce and get 80% of the advance from the bank against their produce on the basis of MSP.

2. Buffer stock reforms

• Stock for difficult situations: There should be moderate buffers/back up and import during difficult situations. For ex – For North-Eastern region it is cheaper to import from Myanmar than transporting from Andhra/Punjab.
• Norms for food stocking: Committee prescribed norms for Food stocking:
  • To implement food security – 61 MMT
  • Strategic reserves – 5 MMT
• Others: Pro-active liquidation policies, importing in case of shortage no harm in importing, reduce import duties on wheat and rice.

EDIBLE OIL

Recently, the Prime Minister has announced a new national initiative on palm oil production to help increase farm income. The scheme, called National Edible Oil Mission-Oil Palm (NMEO-OP), for self-reliance in edible oil involves investment of over Rs. 11,000 crores (over a five-year period).

About National Edible Oil Mission-Oil Palm

• Bring additional land: Under NMEO-OP, the government intends to bring an additional 6.5 lakh hectares under oil palm cultivation.
• Raise domestic production: To raise the domestic production of palm oil by three times to 11 lakh MT by 2025-26.

• Special focus on NE and A&N area: The special emphasis of the scheme will be in India’s north-eastern states and the Andaman and Nicobar Islands due to the conducive weather conditions in the regions.
• Financial assistance: Under the scheme, oil palm farmers will be provided financial assistance and will get remuneration under a price and viability formula.

Significance of the Scheme

1. Food security and nutrition: Global production and demand for palm oil are increasing rapidly. The cultivation of palm oil is more advantageous than other vegetable crops like soy, sunflower, and mustard, with 4-10 times the output per unit of land. This makes its cultivation critical to global food security and nutrition.
2. Low prices and neutral taste: Which enhances oil accessibility to people below poverty lines.
3. Versatile nature: It can be easily blended with mustard, coconut, groundnut, and sesame, oil which are locally produced and traditionally used vegetable oils in Indian cooking.
4. Land availability: Land identified for oil palm plantations in northeastern States is already cleared for cultivation.
5. Suitable climatic condition: Apart from land availability, the NE region possesses climatic conditions suitable for palm oil cultivation.
6. Reduction import dependence: As India import 50% of the palm oil to meet the domestic requirement, increasing the product will reduce the import dependence.
7. Rise in yields: India produces less than half of the roughly 2.4 crore tonnes of edible oil that it consumes annually. It imports the rest. In India, 94.1% of its palm oil is used in food products, especially for cooking purposes. This makes palm oil extremely critical to India’s edible oils economy.
8. Raise farmers income: It is expected to incentivise production of palm oil to reduce dependence on imports and help farmers cash in on the huge market.
9. Development of NE region: The Mission identifies the North East region and Andaman and Nicobar as special focus areas. This will bring development in these areas.
10. Employment generation: Bring forth the new area under cultivation will generate employment.
11. Price assurance on backward linkages: To deal with the shortage of planting materials, the Mission will provide assistance to seed gardens up to Rs 100 lakh for 15 hectares in the focus areas of the northeast and Andamans, and up to Rs 80 lakh in the rest of the country.
    • The Mission will also more than double the support provided for the cost of planting materials, with an increase from Rs12,000/ha to Rs 29,000/ha along with further assistance for maintenance, inter cropping interventions and the rejuvenation of old gardens.

Concerns

1. Associated to Mission

• Environmental
  • Destruction of rainforests and native biodiversity: The focus areas of the mission are biodiversity hotspots and ecologically fragile. Oil palm plantations would denude forest cover and destroy the habitat of endangered wildlife, as witnessed in Southeast Asia.
  • Invasive species: The palm is an invasive species. It’s not a natural forest product of northeastern India. Thus, its impact on biodiversity as well as on soil conditions has to be analyzed.
  • Against commitment to sustainable agriculture: The policy also contradicts the government’s commitments under the National Mission for Sustainable Agriculture.
• Social
  • Impact on community ownership of tribal lands: the mission does not focus on community ownership of land in these regions. Thus, it may detach tribal from their identity linked with the community ownership of land.
  • Past experience: A&N Islands have some prior experiences in palm oil plantations. A 1,593-hectare area on Little Andaman used to be cultivated. However, it was abandoned on instructions of SC, as much of the lands were protected or reserve forests.
  • Change traditional agriculture practices: Traditionally, rice and maize are grown in the North East, but with Government incentivizing Palm oil, farmers are shifting to it.
  • Examples of foreign countries: Sri Lanka, with similarly suitable climatic conditions, has stopped palm oil plantations because it became an invasive species, threatening native plants and animals. Furthermore, it dried up local streams.
• Economic

• Farmers not getting fair price: The most critical issue in the cultivation of oil palm has been the inability of farmers to realise a remunerative price of fresh fruit bunches (FFBs). FFBs of oil palm are highly perishable and need to be processed within twenty-four hours of harvest.
• Income vulnerability: The palm oil mission, instead, aims at achieving complete transformation of the farming system of Northeast India. Studies also show that in case of variations in global palm oil prices, households dependent on palm oil cultivation become vulnerable.

2. Associated with Cultivation

• Long gestation period and high level of investments: A palm is monoculture crop with long gestation period. This makes it more suitable for corporates and not for small farmers.
• Unsuitable geographical location: The ideal locations for oil palm trees are within 8-degrees latitude north and south of the Equator. Therefore, India’s geographical position is not ideal for oil palm cultivation.
• Small landholding: Indian farmers generally have very small farm holdings which make investment difficult.
• Lack of private investment: Corporate sector investments in oil palm are limited compared with Malaysia and Indonesia.
• Water stress: Oil palm is a water-guzzling crop, which requires 300 liters of water per tree per day. Thus, it can lead to water stress in the region.
• Rainfed nature of cultivation in India: Oilseeds farming is done on 27 million hectares of land in India mainly on marginal lands, of which 72% is rainfed.
• Contribute to Climate change: The palm plantation also led to the conversion of rich soils to millions of tonnes of greenhouse gases contributing to climate change.
• Water pollution: Increase in water pollution due to extensive use of fertilisers and pesticides.

Government Measures

• Technology Mission on Oilseeds: The Mission was launched in 1986 to increase the production of oilseeds to reduce imports and achieve self-sufficiency in edible oils.
• National Mission on Oil Seeds and Oil Palm: It was launched during 2014-15 and later merged with the National Food Security Mission. Under it oilseed production grew by 35% from 27.5 million tonnes in 2014-15 to 37.3 million tonnes by 2020-21.
• Integrated Scheme of OilSeeds, Pulses, Oilpalm and Maize: The core idea was to increase the production and productivity of oilseeds to make the country self-reliant in this vital sector.
• Oil Palm Area Expansion under Rashtriya Krishi Vikas Yojana: The Government of India had also supported a Special Program on Oil Palm Area Expansion (OPAE) under RKVY during the year 2011-12 with an objective to bring 60,000 hectares under Oil Palm cultivation.
• Yellow Revolution: The Yellow Revolution is one of the colour revolutions that was launched to increase the production of Edible oilseeds in the country to meet domestic demand.
• Kharif Strategy 2021: The government has also launched the Kharif Strategy 2021 for oilseeds. It will bring an additional 6.37 lakh hectare area under oilseeds and is likely to produce 120.26 lakh quintals of oilseeds and edible oil amounting to 24.36 lakh quintals.
• Other measures:

• Increasing MSP of oilseed crops,
• Creation of buffer stock for oilseeds
• Cluster demonstration of oilseed crops

Initiatives for Sustainable Palm Oil Production

• Roundtable on Sustainable Palm Oil (RSPO): It is a not-for-profit, international membership organisation that unites stake-holders from the key sectors of the palm oil industry. It was established in 2004 to promote the production and use of sustainable palm oil. It develops and implements global standards for sustainable palm oil.
• Greenpalm: It is a certificate trading programme that allows consumers the flexibility to purchase sustainable palm oil certificates. These certificates are issued to producers who are members of RSPO and certified to produce palm oil in a sustainable manner.
• Indian Palm Oil Sustainability framework: The idea of IPOS is to create a set of social, economic, environmental and agronomic guidelines for palm oil production and trade. It is an inclusive sustainability framework, which is made by the Indian industry for the Indian industry and provides them a guideline for promoting sustainable palm oil production and trade.
• Sustainable Palm Oil Coalition: It was formed in 2010, in India, to lobby with government for an incentive-based platform to encourage imports of sustainable palm oil.

Way Forward

• Use of research: While there are real fears of impact on biodiversity, an assessment by the Indian Institute of Oil Palm Research had found 28 lakh hectares across the country which could be safely used for oil palm cultivation. Less than four lakh hectares are currently planted with oil palm.
• Land use planning: Meticulous land-use planning and implementing properly planned local strategies for palm oil cultivation can reduce the pressure on high biodiversity landscapes used for growing Palm.
• Rationalizing import duties: The success of mission oil palm will also depend on import duty on crude palm oil. In 2012, It was recommended that whenever the import price of crude palm oil falls below USD 800 per tonne, the import duty needs to be raised.
• Neutral incentive structure: The need is to devise a crop-neutral incentive structure where cropping patterns are aligned with demand patterns, and the crops are produced in a globally competitive manner.
• Long term mechanism: The transformation this crop has brought about in lives of farmer communities in Andhra Pradesh can help emulate the same in other potential states as well. A strong and robust, long-term policy mechanism will give this crop required push across India.
• Encouraging companies to use certified sustainable palm oil: In response to international criticism of practices in the palm oil industry, various certification schemes have been set up in recent years.
  • The aim of these schemes is to make oil palm cultivation more sustainable by imposing a variety of standards and criteria, thereby reducing rainforest clearance, slash-and-burn and human rights violations in the palm oil industry.