Tussle over the Open Market Sale Scheme 

(MainsGS3:Public Distribution System-objectives, functioning, limitations, revamping; issues of buffer stocks and food security)

Context:

• Recently the Central government decisided to reduce the quantity of foodgrains a bidder can purchase under the Open Market Sale Scheme (Domestic) to curb inflation.
• But several States ruled by Opposition parties have started taking steps to manage foodgrains to be distributed under the Public Distribution System, which is not covered under the National Food Security Act.

 Restricting supplies:

• The Centre has made it clear that the reason for first restricting supplies per bidder and eventually excluding states for the OMSS was to curb inflation and regulate supply.
• But the states have been looking at alternative ways of procuring wheat and rice in the aftermath of the Food Corporation of India’s (FCI) quantity restrictions followed by the refusal to allow states to procure the two food grains through its Open Market Sale Scheme (OMSS).
• For instance, the government in Karnataka announced that being unable to procure enough rice in the market at a reasonable cost in time to meet the needs of its free good grain distribution scheme for BPL families- the Anna Bhagya scheme, it had decided to temporarily give cash to the beneficiaries in lieu of the promised five kg of free rice.

About Open Market Sale Scheme:

• The procurement of food grains like wheat and paddy for the central pool happens in Rabi and Kharif marketing seasons by the FCI and State corporations according to procurement estimates finalised by the government of India before the seasons and these purchases happen as per the Minimum Support Price. 
• From the central pool, the government has to set aside wheat and rice for the 80 crore beneficiaries of free foodgrains under the National Food Security Act (NFSA), maintain a buffer stock, and have a marketable surplus.
• Under the Open Market Sale Scheme, the FCI from time to time sells surplus food grains from the central pool especially wheat and rice in the open market to traders, bulk consumers, retail chains and so on at pre-determined prices. 
• The Corporation does this through e-auctions where open market bidders can buy specified quantities at the prices set at the start of a cycle and revised routinely. 
• Usually, states are also allowed to procure food grains through the OMSS without participating in the auctions, for their needs beyond what they get from the central pool to distribute to NFSA beneficiaries.
• The idea is to activate the OMSS during the lean season, the time between harvests, to improve and regulate domestic supply and availability of the two grains and bring down their prices in the open market; essentially making the scheme a measure to curb food grain inflation.

Curb retail prices:

• The rationale given by the Corporation is that the quantities have been reduced this time “to accommodate more small and marginal buyers and to ensure wider reach of the scheme”. 
• The body contends this move will allow the supplies to the general public immediately. 
• The objective behind the move is also to curb retail prices as allowing smaller bids should ideally break monopolies of bulk buyers, allowing more competitive bids by small buyers.
• Due to global supply chain shocks like the Russia-Ukraine conflict and hampered production at home, retail food inflation has risen sharply.

Conclusion:

• In order to ensure that the inflationary trends are kept under control while ensuring adequate stock levels in the Central pool, Centre has been decided to exclude State governments from the ambit of OMSS