Why in News?

• After the Food Corporation of India (FCI) placed quantity restrictions and refused to permit States to procure the two food grains through its OMSS, the states have been considering alternative methods of obtaining wheat and rice. 

What’s in Today’s Article?

• What is the Food Corporation of India (FCI)?
• What is the Open Market Sale Scheme (OMSS)?
• How has the Centre Revised the OMSS?
• What is the Bone of Contention?
• How have States Reacted?
• The Centre’s Argument

What is the Food Corporation of India (FCI)?

• It is a statutory body set up in 1965 (under the Food Corporation Act, 1964) under the Ministry of Consumer Affairs, Food and Public Distribution, Government of India.
• It was set up against the backdrop of a major shortage of grains, especially wheat, in the country.
• Currently, FCI is mandated with three basic objectives:
  • To provide effective price support to farmers;
  • To procure and supply grains to PDS for distributing subsidised staples to economically vulnerable sections of society; and
  • Keep a strategic reserve to stabilise markets for basic foodgrains.

What is the Open Market Sale Scheme (OMSS)?

• Under the OMSS, 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, etc., at pre­determined 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.
  • This will be beyond what they get from the central pool to distribute to NFSA (National Food Security Act) beneficiaries.
• The OMSS aims to enhance the supply of food grains (ensuring food security) during the lean season and thereby moderate the open market prices (controlling inflation), especially in the deficit regions.
• In this year’s OMMS, a total quantity of 33.7 LMT wheat was offloaded and the prices of wheat came down by 19%.

How has the Centre Revised the 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.

What is the Bone of Contention?

• Through a new notification, the Centre stopped the sale of rice and wheat from the Central pool under the OMSS to State governments, also disallowing private bidders to sell their OMSS supplies to state governments.

How have States Reacted?

• 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.
• In Karnataka, the Anna Bhagya scheme to give rice to marginalised families was a part of the Congress government’s poll promise.
  • The leaders have accused Centre of conspiring to “fail” the State government’s poll guarantee by ensuring the State did not receive the required amount of rice to implement the scheme.

The Centre’s Arguments:

• The reason for restricting supplies per bidder and eventually excluding states from procuring through auctions was to curb inflation and regulate supply.
• The Centre was already meeting its obligations to distribute grains to 80 crore marginalised beneficiaries under the NFSA.