Picture used for representational purpose

Picture used for representational purpose
| Photo Credit: Nagara Gopal

Ever since the Congress-led Karnataka government came to power, it has been struggling to meet one of its major pre-poll promises — the provision of five kg of rice to Below Poverty Line (BPL) and Antyodaya card holders. This would have been in addition to the five kg of rice that is provided under the National Food Security Act. To fulfill its promise, the State government required more rice than usual, which led to a slugfest with the BJP-led Centre.

Until now, a major source of rice for Karnataka was the Centre’s Open Market Sale Scheme (OMSS). Through OMSS, the Food Corporation of India (FCI) had been selling surplus grains. On June 13, the Centre discontinued the sale of grains through OMSS to States to “control inflation”. This put Karnataka, the biggest beneficiary of OMSS, in a fix, forcing it to give cash to beneficiaries instead of the additional rice promised under the Anna Bhagya scheme.

However, the FCI’s supply of rice for ethanol blending has continued to increase. Ethanol blending is a process wherein ethanol is mixed with petrol to reduce the amount of petroleum used. This leads to a decrease in India’s dependence on fuel imports. The amount of rice supplied by the FCI for ethanol blending in 2022-23 was nearly six times more than the quantity of rice that all the States bought through the OMSS scheme.

Under the OMSS, the FCI sells excess rice and wheat to bulk buyers, traders, and States to moderate market prices and to enhance supply during lean seasons. Over 6,800 thousand metric tonnes of rice were sold through the OMSS in the past eight years. Karnataka bought 30% of it — the highest among all States. Chart 1 shows that Karnataka bought over 50% of the rice sold through OMSS in five out of the eight years between FY16 and FY23. The Centre’s discontinuation of the OMSS to States threatens not just the Anna Bhagya scheme, but also the entitlements of over 39 lakh State priority household cardholders who don’t come under the NFSA.

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Several States that run an expanded public distribution system (over and above NFSA norms) depend on OMSS to meet the additional requirement. Chart 2 shows the beneficiaries covered under the NFSA and those under State-run schemes.

Karnataka Chief Minister Siddaramaiah tweeted that the FCI had responded to the State’s request for rice via a letter dated June 12, at the rate of ₹3,400 per quintal, just a day before the OMSS scheme was discontinued. In fact, past trends suggest that States have been the largest buyers of rice sold under the OMSS (Chart 3).

The Centre has maintained that the scheme was restricted to rein in inflation. “The Government of India is already providing foodgrains for 80 crore people. Additionally, 60 crore consumers need to be taken care of. OMSS would be carried out in the interest of those 60 crore, so that inflation remains under control,” said Ashok K.K. Meena, Chairman and Managing Director of the FCI, explaining the Centre’s decision to restrict the supply of foodgrains through OMSS (Domestic) to 100 metric tonnes. Chart 4 shows that retail inflation of rice has been in double digits for the past eight months.

As noted earlier, the supply of rice from the FCI for ethanol blending has not been affected by this decision. As per the FCI’s 2023 policy, the reserve price of rice for ethanol production was ₹20/kg, much lower than the ₹34/kg at which it sells to States under OMSS. In the past two years, the rice supplied for ethanol blending has seen a steep rise (Chart 5). From 5,500 MT in April 2021, the supply of rice zoomed to over 2,50,000 MT in May 2023.


Source: Food Corporation of India, Food and Civil Supplies Department of States

Also read | Lessons from the fracas over foodgrains


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