Storage, Transport & Marketing in Agriculture

Model Answer

Operational Stocks and Strategic Reserves

In India, operational stocks refer to the foodgrains maintained for distribution under public welfare schemes like the Public Distribution System (PDS). These stocks are intended to meet the daily food requirements of the population, ensuring food security. Strategic reserves, on the other hand, are surplus stocks held beyond the operational needs by the Food Corporation of India (FCI). These reserves help stabilize food prices and are used in case of emergencies such as droughts or unforeseen food shortages.

Buffer Stocking Policy: A Critical Evaluation

The buffer stocking policy in India plays a crucial role in food security by managing food supply, stabilizing prices, and preventing crises. However, there are several concerns with its implementation:

1. Open-ended Procurement: The government purchases an unlimited quantity of foodgrains at the Minimum Support Price (MSP). While this aims to support farmers, it often leads to excessive stocks. For example, in August 2023, the FCI held about 243 LMT of rice and 281 LMT of wheat, well above the official stock limits, resulting in surplus grain that isn’t always needed .
2. Financial Burden: Procuring grains at MSP and distributing them at lower issue prices creates a significant fiscal burden. In FY 2021-22, India’s food subsidy bill amounted to ₹2.88 lakh crore. This gap between procurement and issue prices results in high government expenditure .
3. Ineffective Procurement: The procurement process is often inefficient due to the fixed procurement prices announced before sowing. This can lead to excessive purchases in bumper crop years, as seen in the government’s inability to adjust to market fluctuations.
4. Storage Issues: The FCI’s storage capacity is insufficient, leading to grain wastage. Every year, more than 1,500 MT of food grains are damaged due to poor storage conditions, such as pests and water leaks.
5. Limited Private Sector Participation: High MSPs, excessive government control, and restrictions from laws like the Essential Commodities Act have hindered private sector participation in grain markets.
6. Lack of Crop Diversification: The focus on wheat and rice has resulted in the neglect of other crops like oilseeds, leading to a significant reliance on imports for products like edible oils. India imports around 56% of its annual edible oil consumption.

Conclusion

While the buffer stocking policy has successfully contributed to food security, its sustainability needs reassessment. Efficient procurement, better storage facilities, increased private sector involvement, and promoting crop diversification are essential to optimize this policy and reduce its financial and logistical burden on the government.

Model Answer

Key Challenges in Agricultural Produce Storage in India

1. Insufficient Storage Capacity
   India’s current food grain storage capacity is 145 million metric tonnes (MMT), which is far less than the total food production of 311 MMT, creating a storage gap of 166 MMT. This shortage limits the ability to store surplus grains, especially during peak production seasons, leading to inefficiencies and losses.
2. Unscientific Storage Practices
   Many storage facilities lack proper hygiene and infrastructure, resulting in post-harvest losses due to spoilage and infestation. For example, about 10% of the 1,000 lakh metric tonnes of wheat produced annually are lost due to inadequate storage methods. These practices compromise the quality of food grains.
3. Regional Disparity
   Storage capacity is unevenly distributed across states. While southern states boast a storage capacity close to 90% of their food production, northern states like Uttar Pradesh and Bihar fall short, with storage capacity below 50%. This regional disparity exacerbates food security concerns in areas with inadequate storage.
4. Inadequate Cold Storage Facilities
   Cold storage is crucial for preserving perishable items like fruits and vegetables, but India faces a shortage in this area. Most existing cold storage is allocated for potatoes, leading to significant post-harvest losses for other crops. This lack of infrastructure affects the overall efficiency of the agricultural supply chain.

Measures to Address Storage Challenges

1. Ramp Up Scientific Storage Methods
   India must scale up the use of metal silos, which provide better and more scientific storage options. This will improve the handling and longevity of grains, reducing losses.
2. Decentralize Storage Infrastructure
   Storage facilities should be decentralized and set up at the village and Panchayat levels. This is particularly beneficial for small farmers who do not have access to large storage units.
3. Liquidate Excess Stock Efficiently
   Excess agricultural stock should be managed through measures such as exports or selling surplus in open markets. This would reduce pressure on existing storage facilities.
4. Encourage Private Participation
   Private investment in agricultural storage, including cold storage and warehouses, should be incentivized. Encouraging competition will reduce costs and improve infrastructure availability.

The government is already implementing measures like the SAMPADA Yojana and Save Grain Campaign to improve storage. The establishment of an Inter-Ministerial Committee for a large grain storage initiative in the cooperative sector further aims to address these gaps