What do you think about Buffer Stock? Doesn’t it sound like an economic term? Yes, it is an economic term and a scheme of the government of India, where the central government has recently made some crucial decisions to stabilize the prices of agricultural goods in volatile markets. Read below to learn about buffer stock in detail.
Introduction of Buffer Stock
- Buffer stock is an excess amount of raw materials kept on hand to guard against unplanned goods shortages leading into the production process.
- The amount of buffer stock to retain involves balancing the cost of the extra goods against the production downtime avoided by having the additional goods.
- It refers to the practice by governments of purchasing excess commodities when there is an extra supply and selling them when the supply level is deficient. Doing so keeps commodity prices from going too low (during periods of high supply) or too high (during periods of low supply).
- The underlying theory is that this practice results in more stable pricing conditions for producers. The concept can exercise to many products, including oil, corn, and butter.
How does the Food Corporation of India term Buffer Stock?
- The stock of food grains, namely rice and wheat, procured by the government through the Food Corporation of India (FCI) is known as the Buffer Stock. The purchased food grains are stored in granaries.
- The Food Corporation of India (FCI) purchases rice and wheat from the farmers in states with surplus production.
- The farmers are paid the Minimum Support Price (MSP).
- The minimum Support Price (MSP) is a pre-announced price paid to the farmers for their crops.
- Before the sowing season, the government announces the Minimum Support Price (MSP) every year. It is a type of motivation given to the farmers to raise production by farmers.
Why did the government develop Buffer Stock?
- Buffer stock will help resolve the food shortage issues faced during natural calamities like droughts, floods, earthquakes, etc.
- Buffer stock is utilized to meet the food needs of the poor section of society by selling food grains at a lower price when compared to the market price.
Measures Taken by Central Government
- The government has started procurement of 1.00 Lakh tons of imported Tur and 50,000 tons of imported Urad. Currently, the Government of India has 43.82 Lakhs Tonne of buffer stock of various pulses under PSF and PSS. The Chana is allocated from this available stock to the States at the discounted price of Rs 8 per Kg over the issue prices for its distribution by the States/UT under various welfare Schemes.
- For smooth and seamless import of pulses like Tur and Urad, it has been kept under ‘Free Category’ till 31.03.2023.
- In respect of Masur, the primary import duty has been reduced to zero starting from 27.07.2021; The zero Agriculture Infrastructure and Development Cess from 13.02.2022 till 30.09.2022 has been extended till 31.03.2023.
- The Department of Consumer Affairs, on 12th August 2022, issued a directive to all the states and UTs to enforce stock disclosure by stockholders of Tur under Section 3(2)(h) and 3(2)(i) of the Essential Commodities Act, 1955 and also to monitor and verify the stocks.
- The states/UTs have also been asked to direct stockholder entities to upload the data of stocks held by them on the weekly monitoring portal of the Department of Consumer Affairs. Later, states were requested to nominate nodal officers to monitor the disclosure of Tur stock by stockholders.
- The Centre has built a buffer stock of 2.50 LMT (Lakh Metric Tons) of Onion during the Rabi 2022 harvesting period to keep retail onion prices stable even during the lean arrival season. The release of the Onion buffer is initiated to check the price rise. A quantity of 54,000 tons of onion has been released to various Markets across 14 States/UTs from the National Onion Buffer Stock. It has resulted in stable onion prices all through the year.
- Later, to keep the retail onion prices steady, the Government of India offered onion to all the States/UTs and Mother Dairy, Safal, NCCF, and Kendriya Bhandar to lift Onion from Central Buffer Stock at the rate of Rs 800 per quintal.
What is the current Buffer Stock Capacity India have?
Currently, 43.82 Lakh tonne of buffer stock of various pluses is available with the government of India. The government of India’s continuous monitoring and policy decisions has led to stability in the prices of pulses and onion. The Centre keeps a close watch on the production, imports, exports, and availability of essential commodities through frequent interaction with importers, research agencies, trade associations, etc., Rohit Kumar Singh, Secretary Department of Consumer Affairs, said during a media address.
What is the government of India doing to tackle the price volatility of essential goods?
- The Govt. of India has set up the Price Stabilization Fund (PSF) to tackle the price volatility of essential commodities such as Pulses, onions, and potatoes to protect consumers’ interest while promoting direct purchases from farmers/farmers’ associations at farm gate/mandi.
- The Buffer stock of onion and pulses is maintained under PSF to negotiate prices during the lean arrival season to ensure price stability.
- The Department of Consumer Affairs, Government of India, monitors prices of 22 essential commodities (Cereals, Pulses, Edible Oils, Vegetables, and Others). To improve the quality of price data and the analytical output, the department has expanded the geographical coverage by increasing the number of price collection centers from 179 as of 1st January 2022 to 311 centers.
- To improve the robustness of the price monitoring process, the department uses scientific models for predictive analytics and Scenario building models to develop the information-based scenario.
- Prime Minister Narendra Modi, during PM-KISAN Samman Sammelan 2022 (17th October 2022), expressed delight at the 70% increase in pulse production and thanked the farmers, recalling his clarion call in 2015 regarding the production of pulses. “We will make agriculture attractive and prosperous in the Azadi Ka Amrit Mahotsav,” the Prime Minister said.
