Centre Halts Sale of Rice and Wheat to State Govts under OMSS to Curb Price Surge

In a move to combat rising prices and maintain control over inflationary trends, the Centre has discontinued the sale of rice and wheat from the central pool under the Open Market Sale Scheme (OMSS) to state governments. This decision will impact several states, including Karnataka, which offers free grains to support its welfare programs for the underprivileged.

The Food Corporation of India (FCI) has officially communicated the decision to the Karnataka government, which had requested 13,819 tonnes of rice for its own scheme under the OMSS without e-auction for the month of July, at a rate of Rs. 3,400 per quintal.

According to a recent order issued by the FCI, "The sale of wheat and rice under the OMSS (domestic) for state governments is discontinued."

However, the sale of rice under the OMSS will continue for northeastern states, hilly regions, states facing law and order challenges, and those affected by natural calamities, at the existing rate of Rs. 3,400 per quintal. The FCI will have the authority to sell rice to private parties from the central pool stock under the OMSS, as required, in order to stabilize market prices.

The Food Ministry released a separate statement explaining the decision, "In order to ensure that inflationary trends are controlled while maintaining adequate stock levels in the central pool, it has been decided to exclude state governments' schemes from the OMSS (D) this time."

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The central government, on June 12, implemented stock limits on wheat until March 31, 2024, and declared the sale of both rice and wheat under the OMSS to control open market prices and prevent hoarding. The government had previously disclosed the intention to sell 15 lakh tonnes of wheat under the OMSS from the central pool through e-auctions to flour mills, private traders, and wheat product manufacturers. However, the specific quantity of rice assigned for sale to these traders under the OMSS was not specified.

The first auction of wheat for the financial year 2023-24 under the OMSS will take place on June 28. In this OMSS (D), bidders can purchase quantities ranging from 10 to 100 tonnes in a single bid. The maximum quantity per bid for a buyer during the previous sale was 3,000 tonnes. The ministry clarified that the reduction in quantities this time aims to accommodate more small and marginal buyers, ensuring a wider reach of the scheme and immediate availability of stocks sold under OMSS (D) to the general public.

This decision comes amidst the sluggish progress of the monsoon and the escalating prices of rice and wheat. Official data reveals that rice prices have increased by up to 10% over the past year at the mandi level, and by 8% in the last month. The monsoon rains play a crucial role as approximately 80% of the country's total rice production occurs during the kharif season, with sowing expected to commence next month.

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It is worth noting that on January 26, the central government introduced the OMSS policy for 2023, allowing states to procure rice (including fortified rice) and wheat directly from the FCI for their own schemes without participating in e-auctions. The OMSS is typically implemented to sell food grains, primarily wheat and rice, at predetermined prices in the open market during lean seasons to improve domestic availability and stabilize open market prices, especially in regions facing shortages.

As the decision to discontinue OMSS sales to state governments takes effect, states will need to explore alternative avenues to sustain their subsidized food programs and ensure uninterrupted support to the vulnerable sections of society.

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