Why India's lopsided farm procurement benefits Punjab

A Narayanamoorthy | Updated on May 15, 2021

Even in paddy and wheat, not all State farmers have benefited from such procurement.

Never before in the history of Indian agriculture, paddy worth ₹1.73 lakh crore and wheat worth ₹75,060 crore were procured from farmers, during the marketing season 2020-21, at minimum support price (MSP). This is what the Union Budget for 2021-22 had underlined. At first sight, these figures look good. But are the increased procurements of crops benefiting farmers of different States?

In India, the procurement of crops at MSP has undergone a massive evolution over time. As on 2020-21, a total of 39,122 procurement centres for paddy and 21,869 for wheat are operating in India.

Starting with wheat and paddy, MSP is currently announced for a total of 23 crops. It is announced by the Central Government based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), which estimates MSP for all the mandated crops taking into account the cost of production. As per this scheme, these 23 crops (subject to certain quality parameters) brought by farmers to the procurement centres have to be procured at MSP. But in reality, except for paddy and wheat, the MSP scheme is not implemented well.

For instance, wheat procurement has increased from just 51 lakh tonnes (lt) in 1975-76 to 390 lt in 2020-21. During the same period, paddy procurement also increased from 35 lt to 380 lt. However, such robust procurements are not available to farmers cultivating crops such as coarse cereals, pulses, oilseeds, etc, which is also evident from the data presented in the CACP’s Kharif Price Policy report of 2020-21.

The procurement of these crops was low in the past as well. These crops are cultivated mostly under rainfed condition with lot of hardships by resource-poor farmers. Although the demand for these crops continues to grow, it is strange as to why the procurement for such crops with MSP is not implemented?

Even in paddy and wheat, not all State farmers have benefited from such procurement. The total amount of paddy procured during kharif 2020-21 was 575.36 lt. Of this, 202.77 lt were procured from Punjab alone, which is about 36 per cent of the total purchase of paddy. This means that of the total amount of ₹1.08 lakh crore spent so far for the procurement of paddy during kharif 2020-21, about ₹38,880 crore has gone to Punjab’s farmers alone.

Similarly, of the total of ₹73,500 crore disbursed so far to farmers for wheat procurement during 2020-21, as much as 33 per cent has gone to Punjab’s farmers alone. Past data also indicates the same picture. What is the benefit of such a procurement policy to other States’ farmers? How can this be called a national scheme?

For long, the procurement of crops has not been linked to the production of different States. In 2018-19, the share of Punjab in India’s total paddy production was only 11 per cent, but its share in the total procurement was 25.53 per cent. West Bengal, which is the largest producer of paddy, accounted for 13.94 per cent in total paddy production, but its share in the total procurement was only 4.46 per cent. Similarly, Tamil Nadu accounted for 5.26 per cent of the total paddy production, but its share was only 2.91 per cent of the total procurement.

These data suggest that most paddy growing farmers in most States are forced to sell their crops to the private traders at a lower price than MSP. This is also reinforced by the Situation Assessment Survey (SAS) of Farmers conducted by NSSO in 2012-13, which underlined that only 13.5 per cent of paddy farmers sold their produce to procurement agency at MSP.

Procurement for all

A massive amount of public money is spent every year on procurement of crops, which has not benefited the farmers cultivating various mandated crops in different States. Given the federal nature of the country, this practice should not be allowed to continue.

It is necessary to bring in a number of changes in the existing procurement policy to benefit farmers, especially small and marginal, from all the States. First, procurement of crops in each State should be linked with its production. There should be a ceiling for procurement for each State. This will not only help majority of the farmers to get MSP but also prices closer to MSP for their produce even in the open market.

Second, procurement of crops other than paddy and wheat is done at a very low level. In fact, no procurement system is available for some of the mandated crops. Therefore, as suggested by the ‘High Level Committee on Restructuring of Food Corporation of India’ (2015), , the government must create procurement system for pulses and oilseeds with MSP.

Third, a separate Act on “right to sell at MSP by marginal and small farmers” should be enacted.

Fourth, the role of private companies in procurement system cannot be ruled out. In a country which produces about 300 million tonnes of foodgrains, 34 million tonnes of oilseeds, and 320 million tonnes of fruits and vegetables, the process of procurement cannot be done by state supported agencies alone. Companies like ITC and others have been procuring wheat, pulses and oilseeds from farmers now. Therefore, selected private companies with proper permits should be allowed to procure crops at MSP.

Fifth, States should not completely depend on the Centre for carrying out procurement. Telangana, Gujarat, Odisha, Karnataka and Chhattisgarh, for instance, have created State-specific schemes for procuring certain commodities. Other States should also follow suit.

The existing crop procurement scheme is highly skewed, helping a few States and that too paddy and wheat cultivating farmers. Is it not the right time to overhaul the entire procurement system to benefit farmers of every State?

The writer is former Member (Official), CACP. The views are personal

Published on May 14, 2021

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