The Open Market Sale Scheme for wheat and rice

General Studies Paper 3

Context

• The Food Corporation of India’s imposed quantity restrictions followed by the refusal to allow States to procure the two food grains through its Open Market Sale Scheme.

Aftermath

• States have been looking at alternative ways of procuring wheat and rice in the after the Food Corporation of India’s (FCI) imposed quantity restrictions followed by the refusal to allow States to procure the two food grains through its Open Market Sale Scheme (OMSS).
• The Centre has made it clear that the reason for restricting supplies per bidder and eventually excluding states from procuring through auctions was to curb inflation and regulate supply,
• States such as Karnataka and Tamil Nadu have criticised the government for engaging in “politics” at the expense of marginalised beneficiaries of State welfare schemes.

Open Market Sale Scheme

• Under the Open Market Sale Scheme, the FCI from time to time sells surplus food grains from the central pool especially wheat and rice in the open market to traders, bulk consumers, retail chains and so on at pre-determined prices.
• The FCI does this through e-auctions where open market bidders can buy specified quantities.
• States are also allowed to procure food grains through the OMSS without participating in the auctions, for their needs beyond what they get from the central pool to distribute to NFSA (National Food Security Act) beneficiaries.

Centre’s revised version of OMSS

• The Centre decided to restrict the quantity that a single bidder can purchase in a single bid under the OMSS.
• While the maximum quantity allowed earlier was 3,000 metric tonnes (MT) per bid for a buyer, it will now range from 10-100 metric tonnes.
• The FCI claims that the quantities have been reduced this time to accommodate more small and marginal buyers and to ensure wider reach of the scheme.
• The objective behind the move is also to curb retail prices as allowing smaller bids should ideally break monopolies of bulk buyers, allowing more competitive bids by small buyers.

Features of OMSS

• The FCI conducts weekly auctions through e-auctions in the open market to sell surplus stocks of wheat and rice.
• The reserve price of wheat and rice for sale under OMSS is fixed by the Department of Food and Public Distribution (DFPD) every year.
• The reserve price is kept uniform throughout the country without adding any further freight to facilitate buyers to lift stocks from any place at ease.
• The sale of wheat and rice under OMSS is undertaken throughout the year in the non-procuring states and during the non-procurement period in the procuring states.
• The quantum of wheat and rice for sale under OMSS is decided by the DFPD based on the availability and demand of food grains.
• The surplus procuring states (paddy/rice) are not allowed to participate in e-auction for the purchase of rice for their state schemes and they are advised to retain stocks under the state pool for their schemes.

Significances of OMSS

• Enhance the supply of food grains
• Prevent wastage and deterioration of food grains
• Provides an alternative source of food grains
• Generates revenue for the FCI

Challenges faced by OMSS:

• Low demand from the buyers
• Logistical challenges
• Limited impact on stabilizing the market prices
• Does not address the structural problems

Way forward for OMSS

• Revising the reserve prices of food grains
• Improving logistics and quality management
• Diversifying product portfolio
• Coordinating with state governments
• The FCI should also ensure transparency and accountability in its operations under OMSS.

Conclusion

• OMSS is a useful tool for managing excess stocks of food grains in India. It has several features, significances, advantages and disadvantages. It also faces some challenges that need to be addressed. By adopting some measures to improve its functioning, OMSS can play a vital role in ensuring food security and price stability in the country.