Buffer Stock & Buffer Norms in India

The Food Corporation of India is the main agency for procurement, storage and distribution of food grains. In addition to the requirements of wheat and rice under the Targeted PDS, the Central Pool is required to have sufficient stocks of these in order to meet any emergencies like drought/failures of crop, as well as to enable open market intervention in case of price rise.

What are Buffer Norms?

The Buffer norms are the minimum food grains the Centre should have in the Central pool at the beginning of each quarter to meet requirement of public distribution system and other welfare measures. The last changes in the Buffer norms were done in July 2013. According to the norm the  buffer norms of food grains in the Central Pool  are follows:

The Central pool requires maximum 41.12 million tonnes o be maintained in the second quarter as on July 1. The FCI has been constructing storage capacity for holding buffer and operational stocks of food grains at nodal points in the country. The storage capacities available with FCI are mainly used for storage of food grains and partly for other commodities and general warehousing.

Objectives of Buffer Stocks

The buffer stocks are required to

• Feed TPDS and other welfare schemes,
• Ensure food security during the periods when production is short of normal demand during bad agricultural years
• Stabilize prices during period of production shortfall through open market sales.

What are the Current Buffer Stocks?

As against the buffer stock norm of 21.41 million tonnes of rice and wheat (as on 1January of each year), total central pool stocks were 61.6 million tonnes as on 1 January 2015. This shows India’s comfortable position in the buffer stock. However, it has raised the questions over the storage capability of the FCI and rotting grains in the open god downs in the country. The issue of storage had also been taken to the Supreme Court, which suggested that government should distribute the grains free to the poor. The problem is immense, but solution of this problem is not instant. The FCI has to increase the storage capacity to accommodate the record procurement which is expected this year because of a very good monsoon.

Current Buffer Stock Policy of Government

The current buffer norms were revised in January 2015. According to the new norms, the central pool should have 41.1 million tonnes of rice and wheat on July 1 and 30.7 million tonnes on October 1 every year.

These limits were 32 million tonnes and 21 million tonnes earlier. The stocking norms for the quarters beginning January 1 and April 1 have been revised only marginally. The key drivers for increased buffer stocks were increased off take from the TPDS system and also enactment of National Food Security Act.

We note here that FCI buys almost one third of the total rice and wheat produced in the country at minimum support prices! It does not say no to any farmer who wants to sell his produce at MSP. But then it also needs to maintain an excessive, unmanageable and fiscally burdensome food inventory. Earlier, once the buffer norms were met, cabinet approval was needed to sell any part of it in the open market. But then, in January 2015; this situation changed.

The current policy is that Food Ministry is authorized to dispose the surplus stock into open market without seeking cabinet approval. This was a key policy decision and it was needed to iron out the problem of burdensome inventories at FCI and distortion created in market.