To curb price rise, Centre to release more foodgrain stock by open market sale

To curb price rise, Centre to release more foodgrain stock by open market sale

To curb price rise, Centre to release more foodgrain stock by open market sale


Concerned with the rise in foodgrain prices, the Centre decided on Wednesday to sell an additional 50 lakh tonnes of wheat and 25 lt of rice through the Food Corporation of India’s stocks’ Open Market Sales Scheme.

What is Open Market Sales Scheme?

  • An Indian government program called the Open Market Sales Scheme (OMSS) aims to control the supply and costs of basic goods like food grains. A certain amount of goods, including wheat, rice, and other grains, are released by the government under this plan onto the open market for sale to the general public, including wholesalers, retailers, and consumers.

What are the objectives of the Open Market Sales Scheme?

  • Price Stabilization: The government can help maintain market prices and prevent unexpected jumps in the cost of necessities by releasing items from buffer inventories during periods of scarcity or rising costs.
  • Market Stabilization: The plan aids in stabilizing the market’s dynamics of supply and demand. When there is a market deficit, the government’s release of commodities can fill the gap and keep the supply constant.
  • Availability: The government guarantees that critical goods are accessible to customers by selling commodities directly to the market, particularly during times of strong demand or crop failures.
  • Hoarding Reduction: The availability of goods sold by the government can prevent traders and middlemen from hoarding goods, which can lead to price manipulation.
  • Consumer Welfare: The program strives to give consumers access to necessary goods at fair pricing, promoting affordability and food security.
  • Government Revenue: Sales made through the OMSS bring in money for the government, which is then used toward several initiatives or programs aimed at promoting social welfare.

Why did the government use OMSS recently?

    • By selling an additional 25 lakh tonnes of rice and 50 lakh tonnes of wheat through the Open Market Sales Scheme, the Indian government has decided to act.
    • The objective is to boost the domestic market’s supply of these necessary food commodities and so restrain their rising prices.
  •  Lowering the Reserve Price:
    • The government is implementing a plan to reduce the reserve price of rice by 200 yen per quintal.
    • The effective price after this reduction will be $2,900 per quintal.
    • The Department of Consumer Affairs’ price stabilization fund will provide the money for this price cut.

How will it benefit the citizens?

  • Price Stabilization: Price stabilization is one of the main advantages. The market can be protected against sharp price spikes when the government releases goods from its buffer inventories. This makes sure that people can still purchase basic food items even when there is a scarcity of supplies or a rise in demand.
  • Availability: The government guarantees that citizens have access to these things even when there may be a shortage owing to reasons like poor harvests or disruptions in supply chains by making additional quantities of commodities available in the market through OMSS.
  • Food Security: By ensuring a steady supply of necessary food grains, OMSS helps to provide food security. This is crucial for vulnerable populations that depend on cheap staples like wheat and rice for their daily meals
  • Affordability: The intervention of the system in the form of stable prices aids in containing the expense of living. This is especially important for lower-income households whose income is largely dedicated to purchasing food.
  • Preventing Exploitation: The plan can deter traders and middlemen from stockpiling and manipulating prices. In turn, this stops consumers from being taken advantage of during times of shortage.
  • Consumer Welfare: The government supports the welfare of its citizens, particularly those who may find it difficult to afford rising food costs, by assuring a stable supply of food grains at fair rates.

In conclusion, the Indian government is taking several actions in response to the rising cost of food grains. These actions include raising the amount of wheat and rice sold under the Open Market Sales Scheme, lowering the reserve price for rice, and considering wheat import duties. To benefit the population, the general goal is to stabilise prices, provide adequate availability of necessities, and curb food inflation.