The Central Issue Price (CIP) for wheat for the above poverty line (APL) families, which was Rs 450 per quintal in January 1999, had been increased in two steps to Rs 682 per quintal on April 1, 1999. The measures announced in Budget 2000-2001, along with the subsequent increase in the MSP for wheat, took this up further to Rs 900 per quintal on April 1, 2000. There was thus a doubling of the APL wheat price over a fifteen month period. The 52 per cent hike in PDS prices last year had already caused PDS wheat offtake to decline from almost 8 million tonnes in 1998-99 to less than 5 million tonnes during 1999-2000. With the further 32 per cent hike with effect from April 1, 2000, PDS wheat offtake during April-June 2000 has predictably plummeted again, to less than 7 lakh tonnes from over 12 lakh tonnes in the corresponding period last year, despite a doubling of PDS allocation at half APL prices for the below poverty line population ( chart 7).

Chart 7 >> Click to Enlarge
 
Consequently, wheat stocks with the government, which had reached 13 million tonnes on April 1, 2000 from less than 10 million tonnes on April 1, 1999, are now over 27 million tonnes. Given the current trend in offtake, wheat stocks at the beginning of the next marketing season, on April 1, 2001, are likely to be at least 20 million tonnes, or fully five times the required norm of 4 million tonnes on that day.
 
The situation in the case of rice is only slightly better. The PDS issue price for Grade A rice for above poverty line families had been increased from Rs 700 per quintal to Rs 905 per quintal in February 1999, and this was increased further to Rs 1180 per quintal on April 1, 2000. Despite the price rise last year, PDS offtake during 1999-2000, at 10.9 million tonnes, was almost unchanged from the offtake of 10.7 million tonnes during 1998-99. This was because the 29 per cent increase in the rice issue price was almost half that in the case of wheat, and there was in fact no increase in prices for consumers in many rice consuming states which chose to absorb the higher central issue price through enhanced subsidies of their own.
 
However, rice stocks, which were slightly less than the required norm of 11.8 million tonnes on April 1, 1999, increased to 14.9 million tonnes on April 1, 2000 because procurement of rice this year has also been a record at more than 16 million tonnes. This was partly the result of a better output and because low world prices had reduced the demand from exporters, but, as in the case of wheat, the main reason was that the MSP for paddy was fixed 11 per cent above that recommended by the Commission on Agricultural Costs and Prices. Moreover, this year's hike of 30 per cent in the issue price of rice has already caused PDS offtake to decline by more than 30 per cent to 1.8 million tonnes during April-June 2000 from 2.6 million tonnes in the corresponding period of last year, despite the doubled allowance for below poverty line households. Rice stocks on October 1, 2000, when the next procurement season starts, are therefore expected to be at least 11.5 million tonnes, well over the required norm of 6.5 million tonnes on that date.
 
An obvious consequence of such high stocks is the risk that grains may rot, or be devoured by pests, simply because of a shortage in storage capacity. The total storage capacity (including cover and plinth storage which should ideally be used only temporarily) available at present with the Food Corporation of India, the Central Warehousing Corporation, and the various State Warehousing Corporations put together, add up to about 46 million tonnes. As against this, the publicly held stocks of wheat and rice are presently in excess of 41 million tonnes, so that the utilisation of available public sector storage capacity is already around 90 per cent at the national level. In Punjab and Haryana, stocks already exceed storage capacity and have to be stored in the open, awaiting transportation to other locations.
 
On top of this, paddy procurement is due to begin in October and, if last year is any indication, about 9 million tonnes of paddy are likely to be procured during the first six weeks in Punjab and Haryana alone. This influx, given that stocks on October 1, 2000 may be close to 38 million tonnes, means that all storage capacity could be exhausted before November-end when stocks peak before their normal seasonal decline to April. But even if the situation is managed in October-November, through temporary construction and recourse to hire of private storage, the problem would recur in an even more acute form from April 2001 onwards, when wheat procurement is due to begin. The exact quantum of the problem then will depend on the size of rice procurement during October-March of the coming season.
 
Even if rice procurement falls from over 14 million tonnes last year to 12 million tonnes, the total stocks at the beginning of the next wheat procurement season are likely to be over 40 million tonnes at current levels of offtake. Since the available storage capacity would then permit only a maximum wheat procurement of around 8 million tonnes, the stark choices at present are limited to either immediate steps to increase offtake or a crash programme for godown construction and, failing both these, to a decision to contain next year's wheat procurement to less than half of this year's actual.