Coronavirus Fallout: Ample Rice, Wheat Stocks To Support Government’s Food Transfer Plan

The Indian government has tapped into the country’s burgeoning food stocks to provide relief to parts of the population who find themselves with limited means of sustenance amidst a nationwide lockdown.

The 21-day lockdown was announced on Tuesday in response to the widening spread of Coronavirus in India. It brings economic activity to a near-standstill, hurting the most vulnerable sections of society.

On Thursday, Finance Minister Nirmala Sitharaman announced a Rs 1.7 lakh crore fiscal package comprising of food and cash transfers.

The government will distribute 5 kilograms of free wheat or rice, over and above the 5 kilograms allocated per person per month under existing rules. Along with wheat or rice, the government will also distribute 1 kilogram of pulses free of cost. The measure is expected to benefit 80 crore people, accounting for two-thirds of the country’s population.

The government’s move will be supported by large stocks held by the Food Corporation of India.

The combined stocks of rice and wheat stood at 584.97 lakh metric tonnes as on March 2020. A further rise in stocks of wheat is expected after harvesting begins in April and procurement begins the month after.

Food stocks of both commodities rose to a record high of 742. 52 lakh metric tonnes in July last year.

Rising production of rice and wheat, along with increased government procurement, led to a build-up of food stocks, creating a shortage of storage space with the Food Corporation of India.

In ordinary circumstances, when the FCI holds so much stock, they can sell it in the open market at a cost that it covers the cost of procurement as well as the carrying cost, said Hetal Gandhi, director at CRISIL. Now, considering the free distribution of these stocks, the government would need to arrange for payment to the FCI to pay-off loans taken for procurement of the grains being distributed under PDS, she said.

The doubling of ration for the next three months and including of pulses is a good move by the government, said Reetika Khera, associate professor at IIM- Ahmedabad.

However, Jayati Ghosh, professor at Jawaharlal Nehru University questioned how the delivery of these rations would take place. “The government should have thought of how the food grains will get delivered amid social distancing. Currently supply chains have been disrupted and farmers don’t have access to markets,” Ghosh said.