- Wealth PMS (50L+)
The Food Corporation of India continues to own stocks way above the required buffer limits. The redemption for us is that stocks aren’t really going up, they are slowly falling. Here’s the stock chart as of Feb 1:
As you can see, we have, in the FCI, 530 lakh tonnes of Rice+Wheat, when the buffer requirement is only 250 lakh tonnes. (2x overstocked) This buffer norm has recently been downgraded to 210 lakh tonnes (for Jan, Feb, March) so the overstocking is even more. Here’s the new stock norms:
(Multiply by 10 to get lakh tonnes).
We currently have 530 lakh tonnes in stock. This is greater than the HIGHEST amount of stock we should have even including the new buffer norms for the Food Security Act. This is just crazy.
In Rice we own too much rice+unmilled paddy. This is altogether too much, and still, the FCI wanted to import rice from abroad!
On Wheat, we own a lot lesser now, but still 2x what we should own.
At this rate, we should get rid of our stocks or not procure any more. If you see the first chart above, it’s the rapid rise in stocks (FCI Procurement) that seems to have driven up inflation as well. It is ridiculous for our government to pay so much money to buy wheat and rice and just let it rot, while prices in the market kept going up. (and they used the argument that prices are high to increase the prices at which they buy, the MSP, in the next year!).
Hopefully, the downtrend in stocks will continue and the FCI will reduce its procurement. In any case, the FCI purchases seem to happen only in a few states (Punjab, Haryana, Chhattisgarh) so it’s not like it will be a national disaster if we reduced purchases.
See: Our other posts on FCI.
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