Private hand in procurement

The Chairman of the Commission for Agricultural Costs and Prices, Dr Ashok Gulati, has recently called for involving private players in official crop procurement operations. He has a point. Everybody knows how ineffective and skewed the current minimum support price (MSP) mechanism is, being essentially confined to wheat and paddy. Even within that, more than half the rice for the Central pool is procured from Punjab and Andhra Pradesh, which account for hardly a quarter of the country's total output. The imbalance is even more in wheat, where roughly 70 per cent of government purchases are from Punjab and Haryana. In all other crops and regions, there are no agencies to enforce MSPs that exist largely in name. Farmers are, hence, often at the mercy of traders during harvest time, with no means to stagger sales of their crop. Restricting the MSP's effective scope to fine cereals also disincentivises cultivation of less water-intensive oilseeds, pulses, cotton or maize, the production of which are, moreover, not keeping pace with rising incomes and diversification of food baskets. Indeed, there is nothing more perverse than Punjab farmers mining already depleted groundwater reserves to grow paddy. But, then, they are only responding rationally to a system that has no Food Corporation of India (FCI) to pay MSP for arhar or sunflower.

That raises a question: Do we really believe only an FCI or a National Agricultural Cooperative Marketing Federation of India (Nafed) can deliver MSP to farmers? Why can't the Centre also assign the task to private players which are already buying and selling farm produce for meeting their branded product requirements or for proprietary trading purposes? There is no reason for not roping them into the business of buying on Government account, as Dr Gulati has argued in an interview to this newspaper. As Deng Xiaoping said, the colour of the cat matters little so long as it catches the mice. And in the case of MSP, one can expect private corporates — having greater procedural flexibility and no legacy of excess manpower — to do at least a more cost-effective job.

Allowing the private sector to procure crops on behalf of the Government presents a potentially large revenue opportunity for agri-business corporates. Ideally, it should help throw up new players in this space similar to the fresh lot of contractors spawned by the National Highways Development Project or the Delhi Metro. But what a viable public private partnership model in official MSP operations can do, above all, is to stimulate the creation of much-needed backend agricultural marketing infrastructure. This is more pertinent to crops and regions where MSPs are just a mirage. Dr Gulati's idea is certainly worth debating — and implementing.

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