Due to the Food Corporation of India’s (FCI) recent quantity limits and refusal of licence to participate in the Open Market Sale Scheme (OMSS), states across India are looking into other sources of wheat and rice. While the Centre says that these restrictions are intended to control inflation and supply, critics argue that they prioritise political goals over the welfare of marginalised recipients.
What exactly is the Open Market Sale Scheme (OMSS)?
- The OMSS is a programme run by the Food Corporation of India (FCI) that allows surplus food grains, mostly wheat and rice, to be sold in the open market from a central pool.
- The plan permits the FCI to sell these food grains at predetermined prices to traders, bulk customers, retail chains, and other entities via e-auctions.
- E-auctions allow interested bidders to purchase specific quantities of food grains. Furthermore, states can use the OMSS to get grains in excess of their national pool allocation to distribute among National Food Security Act (NFSA) participants.
Key OMSS implementation adjustments Quantity Restrictions:
- The Centre chose to limit the amount that a single bidder can acquire in a single OMSS offer. Previously, the maximum permissible quantity per bid was 3,000 metric tonnes (MT). However, the new OMSS now specifies a maximum quantity per offer of 10 to 100 metric tonnes. This modification intends to accommodate more small and marginal purchasers while also encouraging greater participation in the plan.
- Suspension of Sales to State Governments: On June 13, the Centre notified the states that the sale of rice and wheat from the central pool under the OMSS to state governments would be suspended. This means that state governments will no longer be able to obtain certain food grains directly from the FCI via the OMSS. Furthermore, private bidders are prohibited from selling OMSS supplies to state governments.
The Importance of OMSS in the Indian Food Grain Management System
- Surplus Management: The OMSS enables the Food Corporation of India (FCI) to properly manage surplus food grains from the central pool, mostly wheat and rice. The FCI can avoid waste and maintain ideal stock levels by selling surplus grains on the open market.
- Price Stability: The OMSS is critical in sustaining market price stability. The system serves to stabilise food grain prices by selling surplus grains at predetermined levels on a regular basis, limiting excessive swings and guaranteeing customer affordability.
- Market Competition: The OMSS encourages market competition by allowing diverse entities to participate in e-auctions and purchase food grains, such as traders, bulk customers, and retail chains. This promotes a more competitive market environment by preventing purchasing power concentration in the hands of a few organisations and supporting fair market practises.
- Additional Procurement Channel for States: States in India can use the OMSS to obtain food grains in excess of their authorised quantities from the central pool. This gives states another way to achieve their food grain requirements, especially when implementing assistance programmes like the National Food Security Act (NFSA). It enables states to boost their allocations and ensure that vital food grains are available for marginalised populations.
- Small and Marginal Buyers: Recent OMSS implementation adjustments, such as a reduction in the maximum amount per bid, attempt to accommodate more small and marginal buyers. The initiative attempts to promote diversity, empower smaller market participants, and eliminate monopolies held by bulk buyers by encouraging their involvement. This promotes the growth and viability of small enterprises while also distributing the scheme’s advantages more evenly.
How are states responding to the changes?
- Karnataka: The Anna Bhagya scheme, which attempts to give rice to marginalised families, was a major political promise made by the Congress government in Karnataka. They say that the alterations to the OMSS are politically motivated and impede the implementation of the assistance scheme.
- Tamil Nadu: The revisions in the OMSS have also had an impact on Tamil Nadu. Because the Union government has stopped supplying rice under the OMSS, the state government has explored alternate sources to purchase 50,000 tonnes of rice. The scheme allowed the state to purchase rice and then subsidise it for ration card members.
- Political Criticism of the Centre: States such as Karnataka and Tamil Nadu, among others, have chastised the Centre for engaging in politics at the expense of marginalised beneficiaries of state welfare schemes. They contend that the OMSS implementation restrictions and adjustments are motivated by political reasons rather than the wellbeing of vulnerable members of society.
How does OMSS help with food security?
- National Food Security Act (NFSA) Distribution Beneficiaries: The OMSS enables states to get additional food grains from the central pool in excess of their authorised quantities for distribution to NFSA recipients. This assures that the eligible population, particularly the marginalised segments of society, has access to a sufficient supply of basic food grains, such as wheat and rice, at reasonable costs.
- Price Stabilisation: By selling surplus food grains through the OMSS on a regular basis, the plan helps to stabilise market prices. The availability of surplus supplies from the central pool eliminates excessive price volatility and guarantees that customers’ access to food grains remains inexpensive.
- Market Competition and Inclusivity: The OMSS fosters market competition by allowing other entities to engage in e-auctions and purchase food grains, such as traders, bulk customers, and retail chains. This broadens the buyer base and eliminates monopolistic practises, promoting fair market competition. Furthermore, recent OMSS implementation adjustments, such as lowering the maximum amount per bid, aim to stimulate involvement of small and marginal buyers, increasing inclusivity and empowering smaller market participants.
- Surplus Management: The OMSS assists in the management of surplus food grains kept in the central pool by the Food Corporation of India (FCI). By selling these surpluses on the open market, the FCI reduces waste and maximises the use of available resources.
- Additional State Procurement Routes: The OMSS provides states with an additional route to buy food grains in excess of their authorised quantities from the central pool. This assists states in meeting their food grain requirements for welfare schemes and other state-level efforts aimed at guaranteeing food security.
OMSS is facing a number of challenges.
- Low buyer demand as a result of high reserve prices: The OMSS confronts a dilemma of low buyer demand, owing mostly to the FCI’s high reserve prices. These reserve prices, which include costs such as procurement, storage, transportation, and handling, are frequently higher than market pricing.
- Logistical impediments to timely delivery: Food grain transportation, handling, and quality difficulties offer logistical challenges for the OMSS. These difficulties might cause delays and have an influence on client satisfaction. The FCI’s reliance on railways for grain transportation might cause congestion and worsen logistical issues.
- The OMSS has a limited impact on market price stabilisation because it represents a small percentage of total food grain supply and demand in the country. The FCI distributes the majority of its equities through the Targeted Public Distribution System (TPDS) and other welfare programmes (OWS), with only a small portion sold through the OMSS.
- Inadequate structural concerns addressed: The OMSS fails to fully address structural difficulties connected with food grain management, such as procurement, distribution, and buffer stocking rules. Reforms in these areas are required to ensure food security and economic responsibility. Excessive procurement by the FCI, over and above the requirements of TPDS and OWS, results in excess stockpiles and high carrying costs.
Source: https://www.thehindu.com/news/national/explained-the-open-market-sale-scheme-for-wheat-and-rice/article67023932.ece#:~:text=The%20idea%20is%20to%20activate,to%20curb%20food%20grain%20inflation.