Balance of public procurement and market sales a win-win for farmers and consumers

IAS Prelims 2023

azadi ka amrit mahotsav

Wheat farmers across the country benefitted from the higher market rates as mostly /majority of farmers sold their produce to the private traders at higher market rate in comparison to the MSP.  Accordingly, the farmers could reap higher remuneration for their produce which is the main objective of the policy of Govt. of India towards farmers welfare. The prevailing situation, where more options were made available to farmers to sell their produce, empowered them to choose the best bettering the Minimum Support Price. It has been reported that during this season the farmers sold their produce at an average rate of Rs. 2150 per quintal thereby earning more on selling their produce in the open market as compared to MSP value Accordingly, on the estimated procurement quantity of 444 lakh MT, on an average, the farmers may have earned around Rs. 95460 crore at the rate of Rs. 2150 per quintal instead of Rs. 89,466 crores at the MSP of Rs. 2015 per quintal. Thus the wheat farmers may have overall got more than Rs. 5994 crore compared to MSP.

The downward trend in public procurement is attributed to the significantly higher purchase of wheat by private traders as wheat price in the international market has shot up due to international demand-supply mismatch on account of prevailing geopolitical situations. The market prices of wheat remained continuously higher than the MSP throughout the procurement period across the country i.e. around Rs. 2100/- to 2500/- per quintal.

Wheat procurement in the current season is down by 58 percent missing initial estimates of 444 lakh MT. It is expected that the procurement of wheat during RMS 2022-23 may touch only upto 190 lakh MT by the end of the season.

The estimates of wheat procurement were kept at 444 lakh MT on the basis of decision taken in the State Food Secretaries’ Meeting held in February 2022, before the commencement of current RMS 2022-23.  The total procurement of wheat last year during RSM 2021-22 was 433.44 lakh MT.

The MSP of wheat for RMS 2022-23 was also announced by the Govt. of India, well in advance during the month of September 2021 with a hike of Rs. 40/- per quintal (2%) from Rs. 1975/- per quintal to Rs. 2015/- per quintal keeping in view the recommendations of CACP. The MSP of wheat has increased by around 49% upto 2022-23(Rs. 2015/Quintal) in comparison to 2013-14(Rs. 1350/Quintal).

On the domestic front, the country has surplus wheat and rice stocks available currently as well as hence next year. After wide consultation with State Govts, GOI has re-allocated wheat provision in favour of rice under PMGKAY and NFSA, thereby freeing 55+62=117 LMT wheat. The projected wheat stock position as of 01.04.2023 would be around 141 LMT which is around two times the minimum requirement as per stocking norms of 75 LMT after meeting all requirements under NFSA, PMGKAY and Other Welfare Schemes for the year 2022-23. Similarly, availability of rice will be surplus too.

To ensure remunerative price of the produce to farmers, Minimum Support Price (MSP) of 22 mandated agricultural crops is announced by the Government of India at the beginning of the sowing season of crops.  MSP is finalized on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) which is determined keeping in view   input costs and margin to farmers. While recommending MSPs, CACP considers important factors like cost of production, overall demand-supply conditions, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors, the likely effect on the rest of economy, besides ensuring rational utilization of land, water and other product ion resources and a minimum of 50 percent as the margin over cost of production.

There exists a transparent & uniform Policy for procurement of wheat by FCI and State Govt. Agencies across the country. In any state, the net marketable surplus quantities offered by the farmers within the stipulated procurement period & conforming to the specifications prescribed by Government of India are purchased at MSP for central pool by the Govt. agencies. However, if any producer/ farmer gets better price in comparison to MSP, he is free to sell his produce in open market. The major wheat procuring States in the country with substantial contribution to public procurement is Punjab, Haryana, Madhya Pradesh, Uttar Pradesh and Rajasthan.

  The Govt. of India has regulated wheat export w.e.f. 13.05.2022 which changed the market dynamics, preventing speculative wheat trading and  cooled down the inflationary trend of the price of wheat & wheat products in the domestic market. In order to ensure that no farmers with surplus wheat are affected on account of exports regulation, Govt. of India in general extended the procurement season. This extension facilitated those farmers, who had not participated in public procurement earlier but were keeping the wheat stocks with them, to come to purchase centres for selling wheat to FCI & State procuring agencies. Also, in order to mitigate sufferings of farmers of Punjab and Haryana due to a fall in yield of wheat crop on account of early onset of summer and untimely heat wave and to boost procurement for the central pool, GOI relaxed permissible limit of shrivelled grains from 6% to 18% in the States of Punjab and Haryana. The State Govts were also requested to facilitate procurement in more proactive ways by inviting more & more farmers to participate in procurement operations so as to reap benefits of MSP. Still, the wheat arrivals in mandis for public procurement was lesser which is a clear indication that farmers were able to get a better price than MSP and they were able to sell directly to private buyers at higher rates



Source PIB