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Informist, Monday, May 19, 2025

By Afra Abubacker

NEW DELHI – With barely six weeks left before the Food Corp. of India wraps up rice auctions under the open market sales scheme for 2024-25, the demand for rice remains sluggish. With rice stocks at an over two-decade high, the FCI is desperate to offload inventories, but the response from traders has been underwhelming due to surplus supply in the market. 

FCI's open market sales will conclude by Jun. 30, and the market is awaiting the government's announcement of the revised reserve price of rice for the upcoming 2025–26 open market sales scheme. So far, the current prices have done little to attract buyers. 

According to traders, the rice offered by FCI is uncompetitive, both in price and quality. "Why would traders buy FCI rice at an advance (payment) when they can get rice at cheaper rates on credit," a Delhi-based trader said. "Much of the FCI rice stock is two to three years old, and buyers have to pay upfront with rules and regulations." Moreover, only domestic traders are allowed to participate in the auction as the rice bought under the scheme cannot be exported legally, he added. 

According to an FCI official, the Department of Food and Public Distribution will soon release the reserve price for the upcoming sales scheme. The reserve price of rice for 2024-25 was INR 2,800 per 100 kg. However, traders deem FCI rice competitive only at INR 2,500 per 100 kg. While the open market sale scheme usually concludes by the end of the financial year in April, it was extended till June this year, the FCI official added.
 

Since August, FCI has offered 7.2 million tonnes of rice under the scheme, but managed to sell just 32% or 2.3 million tonnes, according to official data. FCI is holding auctions twice a week--on Wednesdays and Thursdays--to speed up sales, but surplus paddy across the country continues to suppress demand. 

Amid tepid demand, FCI's rice sale prices have remained subdued. The average selling price fell to INR 2,849.41 per 100 kg on Thursday from INR 3,167.3 per 100 kg at the start of the auctions in August, but was slightly up from INR 2,829.6 per 100 kg on Wednesday, data showed.

As of May 1, rice stocks in the central pool were at a 21-year high of 38.1 million tonnes, and 20% up on year. The government seems desperate to clear its swelling rice stocks at its godowns. The Centre has announced the distribution of ration supply for three months--covering June, July, and August--in a single phase starting May 21. 

The government has also increased its rice allocation for ethanol production. A total of 5.2 million tonnes of rice has been earmarked for 2024–25, including a recent addition of 2.8 million tonnes. Distilleries can now lift rice until Oct. 31, extending the earlier deadline of Jun. 30.

The reserve price for ethanol production rice remains at a heavily subsidised INR 2,250 per 100 kg, significantly below the economic cost of INR 3,975 per 100 kg. Yet, offtake remains disappointing. Bharat Petroleum Corp. Ltd. has issued distillers allotment letters for 2.65 million tonnes of rice, but only 1 million tonnes have been lifted so far, the FCI official said. He attributed the slow pace to possible logistical or operational challenges on the part of distillers.

Despite multiple interventions, the government continues to face challenges in clearing its piling rice stocks amid good supply in the domestic market. End

Edited by Saji George Titus

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