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Public Distribution System- objectives, functioning, limitations, revamping, issues of buffer stocks and food security Lesson 5
In this Lesson Buffer Stock
Buffer stock is maintaining reserves of a commodity that is used to prevent price fluctuations and unforeseen emergencies Buffer stock is usually maintained for essential commodities and necessities like food grains, pulses etc The concept of buffer stock was first introduced during the IVth Five Year Plan (1969-74) FCI is entrusted with responsibility of maintaining buffer stock in India FCI was set up in 1965 (under the Food Corporation Act, 1964) against the backdrop of major shortage of grains in the country . . . *
Buffer stock of food grains in the Central Pool is maintained by the Central Government for Food security * Targeted Public Distribution System (TPDS) . Welfare Schemes involving nutritional security . Emergency situations, Crop failure, Natural disasters * Price stabilisation or market intervention to augment supply
The Cabinet Committee on Economic Affairs fixes the minimum buffer norms on quarterly basis every year In addition to buffer norms, Government of India has prescribed a strategic reserve of 30 lakh tonnes of wheat from 2008 and 20 lakh tonnes of rice from 2009 "Foodgrain Stocking Norms" refers to the level of stock in the Central Pool that is sufficient to meet the requirement of foodgrains and emergencies at any point of time Earlier this concept was termed as Buffer Norms and Strategic Reserve . . .
As per the 2015 Report of the High level Committee on Reorienting the Role and Restructuring of FCI headed by Shanta Kumar . . During the last five years buffer stocks with FCI have been more than double the buffer stocking norms This has lead to inflation in foodgrain prices and even Spoilage, wastage, rotting of food grains in the FCI godowns Increased the Centre's fiscal deficit due to MSP . *
Reasons for these excess stocks are export bans and open ended procurement, accepting whatever amount that is supplied by farmers The report also highlights the lack of a pro-active liquidation policy . The current system of liquidation of excess stocks through Open Market Sale Scheme or in export markets is ad-hoc, slow and inefficient
Recommendations of Shanta Kumar Committee regarding Buffer stock: * FCI hand over all procurement operations of wheat, paddy and rice to states that have gained sufficient experience in this regard and have created reasonable infrastructure for procurement These states are Andhra Pradesh, Chhattisgarh, Haryana, Madhya Pradesh, Odisha and Punjab The report recommends a transparent liquidation policy that should automatically come into effect whenever FCl is faced with surplus stocks over buffer norms .
The report stresses the need for greater flexibility to FCI to operate in Open Market Sale Scheme and export markets whenever needed FCI will accept only the surplus from these state governments to be moved to deficit states FCI should move on to help those states where farmers suffer from distress sales at prices much below the MSP and which are dominated by smallholdings like Eastern Uttar Pradesh, Bihar, West Bengal, Assam Reduce import duty on wheat and rice . * * .
The committee has recommended 61 MMT stock for implementing NFSA, 2013 and 5 MMT as Strategic Reserve, 5 MMT as Forex Currency Reserve. In the event of excess of stock availability with the FCI, beyond what is mentioned above, the FCl must activate automatic liquidation policy and sell through Open Market Scheme In the event of shortage below the Buffer norms, import from outside. . . .