Central Idea

The Centre has discontinued the sale of rice and wheat from the central pool to State governments under the Open Market Sale Scheme (OMSS).
This move is aimed at controlling price inflation and stabilizing food prices, but it may have an impact on states like Karnataka that offer free grains to the poor.

What is Open Market Sale Scheme (OMSS)?

The OMSS refers to the government’s selling of food grains, such as rice and wheat, in the open market at predetermined prices.
The scheme aims to enhance grain supply during the lean season and moderate open market prices.
It consists of three components:

Sale of wheat to bulk consumers/private traders through e-auction.
Sale of wheat to bulk consumers/private traders through e-auction by dedicated movement.
Sale of Raw Rice Grade ‘A’ to bulk consumers/private traders through e-auction.

To ensure transparency, the Food Corporation of India (FCI) has adopted e-auction as the method for selling food grains under the OMSS (Domestic).
Weekly auctions are conducted on the NCDEX platform.
State governments and Union Territory Administrations can participate in the e-auction if they require wheat and rice outside TPDS & OWS (Targeted Public Distribution System & Other Welfare Schemes).

Controlling price inflation: Discontinuing OMSS helps regulate the supply of rice and wheat to prevent price hikes.
Ensuring price stability: By limiting the availability of grains through OMSS, the government aims to maintain stable market prices.
Balancing stock levels: Discontinuation allows for better management of grain stock in the central pool.
Streamlining distribution channels: OMSS discontinuation enables a more focused and efficient distribution of grains through targeted welfare schemes.
Efficient utilization of resources: By discontinuing OMSS, resources can be allocated more effectively to optimize procurement and distribution efforts.
Flexibility in response to market conditions: The discontinuation provides flexibility to adjust grain supply based on market demands and conditions.
Promoting market competition: The absence of OMSS encourages the participation of private traders and bulk consumers, fostering a competitive market environment.

Adverse weather conditions: Unseasonal rains, hailstorms, and higher temperatures have posed challenges to wheat production.
Lower production and higher prices: The adverse weather conditions may lead to reduced wheat production and subsequent price increases.
Rice price fluctuations: Rice prices have already increased by 10% at the mandi level in the last year.
Dependence on monsoon rains: Monsoon rains are crucial for rice production, as 80% of the country’s total rice production occurs during the kharif season.
Potential impact on food security: Lower production and price fluctuations can affect food security, particularly for vulnerable sections of society.
Procurement challenges: Slow wheat procurement and increased prices create difficulties in achieving procurement targets and maintaining stock levels.
Potential impact on overall agricultural output: Production challenges in wheat may have a ripple effect on the overall agricultural sector and farm incomes.
Need for stabilizing measures: Measures to stabilize supply, improve agricultural practices, and manage weather-related risks are crucial to address these concerns.

Food Corporation of India: FCI plays a vital role in ensuring the availability of food grains at reasonable prices to vulnerable sections of society through the Public Distribution System.
Increased Procurement: The government has set a procurement target of 341.5 lakh metric tonnes of wheat for the ongoing Rabi Marketing Season (RMS) 2023-24.

The Centre’s decision to discontinue the sale of rice and wheat to states under the OMSS aims to control price inflation and stabilize food prices.
Exceptions have been made for regions facing specific challenges.
The imposition of stock limits and offloading through the OMSS demonstrates the government’s efforts to manage overall food security and prevent hoarding.
However, concerns remain regarding lower wheat production due to adverse weather conditions, highlighting the need for measures to stabilize supply and stock levels.