Why do Indian traders prefer to buy rice from FCI in the open market?.

Ethanol producers are buying broken rice in the open market at ₹ 26-26.50/kg, although sales of rice under the Food Corporation of India’s (FCI) Open Market Sales System (OMSS) remain weak. Industry players and traders say FCI needs to lower prices to generate business interest. “FCI’s base price of ₹ 29/kg may seem low to the government, but it cannot be compared to the same rice available in the open market,” said Suresh Putthi, a trader in Delhi’s National Capital Region. .

Problems with FCI’s offer

FCI must reduce the selling price of rice under OMSS. It should provide good quality material after grading rice based on actual breaking percentage and consider offering parboiled rice to consumers who prefer that variety. In addition to the price of ₹ 29/kg, additional charges will be added. OMSS sales are subject to GST. Then we have to spend separately on jute bags,” said Delhi-based exporter Rajesh Paharia Jain. Since the transport costs also come into play, according to him, it is not profitable for traders to buy rice at this price. In addition, buyers must pay the full amount in advance for the amount to be charged, which adds to the overhead.

Lack of sincerity?

On the other hand, ethanol producers have no such problems. They are also given time to pay their dues to the merchants who supply these products. So the shop prefers to buy from the open market. “If a Ranchi-based company can sell its cooked rice to Delhi consumers at ₹ 42-45 ₹ 2050-₹ 2100/hundred (₹ 31/kg for rice) after buying raw rice with at least four intermediaries. FCI can If it is making a sincere effort, it will offer rice at ₹ 28-29/kg to consumers easily,” said Bareilly-based rice trader Balram Aggarwal.

Rahul Chauhan of I-Grain said, “Last year, more rice was sold through the Public Distribution System (PDS) than this year. Since rice is a non-perishable product, end users have the option of storing it for later consumption. As a result, consumer demand for certain types of rice remained low”.

Lack of competitive advantage

Putthi said consumers who eat rice have different choices in each state and even region. The quality of rice supplied by FCI is 20-25 percent broken. It cannot compete with up to 5% crushed grain available on the open market. The demand for rice provided by FCI is low because such rice is only needed by those segments that do not receive enough or no grain through feed. Chauhan said that due to reduction in procurement of wheat for 2022-2023, the quota of rice under PDS was increased in 2022 after wheat stocks were cut. “Although some quantities have been restored, there are still many states where more rice is being distributed instead of wheat,

“Don’t understand the dynamics”

After a crackdown on rice exports, including bans on some varieties and imposition of tariffs, general business sentiment suffered. “Mills and processors fear that if prices rise, the government can act against them at any time, as was done in the case of wheat, pulses and edible oils, by imposing a stock limit,” Chauhan said. Traders and industry experts say this poor response to the sale of FCI OMSS is due to failure of government officials to understand the dynamics of the rice business. One of the reasons for this is that they look at wheat and rice through the same lens, which is wrong considering that there are many varieties of rice in the country and different consumers in each region. The Center has announced that it will sell rice under OMSS as part of curbing food inflation. But rice prices tended to rise despite this.

14% increase compared to last year

According to the Ministry of Consumer Protection, the price of rice increased by 14 percent compared to the previous year, while the price of wheat increased by 1.3 percent and flour (atta) less . than 1 percent. India’s paddy rice crop has been affected by inadequate rains in eastern regions in 2022 and an El Nino effect in southern India in 2023. Kharif rice production between the current crop year and June is estimated to be 3.8 percent lower (106,110 mt) . mt last season. Although a record 135.76 million tonnes of rice production was forecast for 2022-2023, experts say the lack of rice varieties consumed by the grain-eating population has led to a rise in domestic prices.

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