Pvt firms can help pare MSP operation costs

The Centre should engage private agencies in procurement operations under its minimum support price (MSP) operations and this will lead to a minimum 10 per cent savings in operational costs, according to Mr Sanjay Kaul, Managing Director, National Collateral Management Services Ltd (NCMSL).

Speaking at a session at The Hindu Business Line -YES BANK Food & Agribusiness Conclave here on Monday, Mr Kaul noted that currently Government agencies procure 25 million tonnes (mt) of the marketable surplus of 45 mt in wheat and 35 mt out of 65 mt in the case of rice.

That leaves very little for the private sector, despite the manifest inefficiency of Government agencies procuring and holding stocks much in excess of the requirements of the public distribution system. Today, the excess holdings amount to around 25 mt, on which the annual carrying burden is estimated at Rs 2,500 crore.

“Excess stocks should not be, as a matter of policy, held by the Government. Any excess should be left to be procured and stored by the private sector. You just need to compensate them for the difference between the market price and the MSP,” Mr Kaul said.

Thus, if the market price of wheat is Rs 1,000 a quintal against the MSP of Rs 1,120, companies could be given a subsidy of Rs 120 a quintal. As against this, the Government is now compensating the Food Corporation of India (FCI) for its total economic cost, which is estimated at over Rs 1,600 a quintal.

Recently, in an interview to Business Line , the Chairman of the Commission for Agricultural Costs & Prices (CACP), Dr Ashok Gulati, had recommended handing over the job of procuring foodgrains to corporates, especially in regions and crops where FCI and other agencies are not present.

“In the past, the FCI had actually assigned procurement operations to us (NCMSL) in Orissa and Madhya Pradesh and we had bought about 3 mt during the 2005-06, 2006-07 and 2007-08 seasons. But that was done when they themselves needed paddy very badly,” Mr Kaul pointed out.

Meanwhile, speaking to presspersons at the sidelines of the Conclave, the Planning Commission Member, Prof Abhijit Sen, favoured lifting of the current ban on exports wheat and non-basmati rice, while suggesting the simultaneous levy of an export duty.

“Export duty is necessary because global grain prices are very high. If unrestricted exports are allowed, domestic prices will go up, putting pressure on food inflation,” he said. Prof Sen, further, argued against shipping out grain from the FCI's stocks, saying that the Government should not get involved in exports as it did in the past and leave it to private traders. Prof Sen projected food inflation for 2010-11 to end up at about seven per cent, from the February level of 8.31 per cent. A bumper rabi crop is expected to ease inflationary pressures in food.

Every 4th food-insecure person is an Indian

In 2010, the world had an estimated 925 million food-insecure people, of which India accounted for 237 million, said Dr Gavin Wall, Country Representative, UN Food and Agricultural Organisation (FAO) said in his address. The 237 million figure for India is higher than even the 200 million for Sub-Saharan Africa, Dr Wall said.

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