Jun 8, 2013

The easy way to destroy India's food self-sufficiency: Open up procurement to private sector.


Food procurement and assured prices to farmers through the MSP regime is what has turned India food 'self-sufficient'.


Finance Minister P Chidambaram has called for bringing in private players to participate in foodgrain procurement. “The government is the largest and in many ways the only bulk buyer of cereal crops. The discovery of market prices is affected by minimum support price.” By opening to the private sector, the Finance Minister thinks procurement will improve as it will benefit both the consumers as well as the farmers.
This has serious implications for not only country’s food security but also will impinge upon food self-sufficiency so assiduously built over the past four decades.

For farmers, such a policy change will mean an end of an era where wherein they were getting a minimum assured price for at least wheat and paddy. Although the Commission for Costs and Prices (CACP) announces the minimum support price for nearly 24 crops every year, it is only in case of wheat and rice that farmers get the benefit of minimum support price since the Food Corporation of India (FCI) as well as some State agencies steps in to buy it from the markets. In others words, the minimum support price for wheat and rice becomes an assured price for farmers.

Mr Chidambaram gives an impression as if the procurement of wheat and rice by the government agencies crowds out the private players, who would have paid a better price to farmers. This is not true. In reality, the procurement system nowhere says that it is only the government agencies that have to buy foodgrains from the mandis. Private players too can come and make purchases from the mandis. Only when there are no buyers for wheat, for instance, at the procurement price of Rs 1350 per quintal that it becomes mandatory for the FCI to purchase the produce.

Every procurement season, some of the wheat and paddy is certainly purchased by the private players at a relatively higher price than the procurement price announced by the government. Bulk of the purchase is however made by FCI and State agencies. The stability in wheat and paddy prices is what has sustained farmers in the Green Revolution belt of Punjab, Haryana, western Uttar Pradesh all these years.

What Mr Chidambaram is therefore very cleverly suggesting is to dismantle the existing procurement system that will allow the private sector to make purchases at the prevailing market prices. If the private sector is so keen, I don’t understand why does it not buy wheat and rice from farmers in Bihar, eastern Uttar Pradesh, Odisha and West Bengal where the mandi network doesn’t exist? In any case, private players, including arhtiyas, dominate bulk buying of wheat and rice in all these States. Invariably, at all these places farmers have to resort to a distress sale getting not more than Rs 900 to Rs 1000 per quintal as the wheat price. Unless Mr Chidambaram wants Punjab and Haryana farmers to also go in for distress sale, I don’t understand his logic of price discovery.

In addition, if the private players are so keen to help the farmers as well as the consumers why can’t they demonstrate their willingness to do so in the remaining 22 crops for which there is no reliable procurement system. After all, pulses are an important part of the average Indian diet. Yet, its production is not picking up because there is no marketing system that provides an assured price to farmers. Farmers do not have the ability to bear the shocks of the volatility of the markets, and therefore opt to cultivate wheat and paddy offering an assured price. The private sector can easily provide the benefit of what it calls as price realisation offering a higher price to growers.

Take the case of sugarcane. Over the years, it has turned out to be the most important cash crop for farmers. This is primarily because of the State Advised price of cane, which the State government decides and which the sugar mills have to pay. Withdraw the State Advised price and I am sure many sugarcane farmers will be forced to commit suicide. And what about crops like potato and tomato? Don’t we see farmers throwing potato and tomato onto the streets at the time of a glut when prices fall? Why the private players can’t rescues farmers with a higher price at times of glut?

The point I am trying to make is left to private players farmers would be exploited to the hilt. This is exactly the reason why the government had constituted the Agricultural Prices Commission soon after Green Revolution was ushered in 1966. At the same time it set up the Food Corporation of India. Both these were excellent initiatives and what needs to be understood is that if the country has stopped food imports and turned food self-sufficient it is primarily for the role played by these two organisation in providing an assured price and an assured market to farmers. Any attempt to tinker with the procurement system therefore is wrought with grave implications for the farming population as well as the country’s food security. 

1 comment:

Devinder Sharma said...

While P Chidambaram has been speaking for dismantling the procurement system in India, Egypt is expecting a record wheat harvest in 2013-14 thanks to the introduction of a well regulated procurement system.

http://english.ahram.org.eg/NewsContent/3/12/99740/Business/Economy/Egypt-expects-record-purchase-of-domestic-wheat-in.aspx

Devinder Sharma