Procurement of wheat by central & state governments

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Procurement of wheat by central & state governments

Wheat procurement is underway in various states of the country. The Centre procures wheat by paying the minimum support price (MSP) announced for the crop while states do it under two systems - the centralised one, also called non-decentralised procurement system (non-DCP) and the decentralised one, also called DCP.

Procurement of wheat by the government

  • Under the first system, the FCI directly or through state government agencies procure wheat from the purchase centres established across the states based on various parameters like moisture, lustre, broken/shrivelled etc.
    • In Punjab and Haryana, farmers sell their crop to the central agency or state agencies through arhtiyas (commission agents).
    • The wheat procured by the state agencies is handed over to the FCI for storage or for transportation to the consuming states.
    • The FCI, which is the central nodal agency for wheat procurement, pays the cost of procured wheat to the state agencies.
  • Under the decentralised system, which was brought in the late 1990s to promote local procurement and save the transportation cost and time, the state government or its agencies procure, store and distribute wheat against the Centre’s allocation for targeted public distribution system and other weaker sections etc with the state, and that the excess stocks procured by the state and its agencies are handed over to the FCI for the central pool.
    • The expenditure incurred by the state government on the procurement, storage and distribution of stocks under the decentralised system are reimbursed by the Centre.
  • Apart from paying the MSP announced by the government before the rabi harvesting on the recommendations of the Commission for Agriculture Cost and Price (CACP) and other factors, the Centre also reimburses the arhtiyas’ commission, administrative charges, mandi labour charges, transportation charges, custody and maintenance charges, interest charges, the gunny bag cost and statutory taxes.
  • The cost of excess stocks handed over to the FCI is reimbursed to the state government or agencies as per the Centre’s policies.
  • Procurement agencies ensure that the stocks brought to mandis are purchased as per the specifications fixed by the government and farmers are not compelled to sell their crop below the MSP.
  • But if a farmer gets a better price from private players, he can sell to them.

From how many states is wheat procured for the central pool?

  • The main purpose of procuring for the central pool is ensuring the MSP as well as the country’s food security by making food available to the weaker sections at affordable prices.
  • 15 states on the procurement list for the central pool, but the contributions from seven of the states are negligible.
  • Only Punjab, Haryana, Madhya Pradesh, Uttar Pradesh and Rajasthan are the main contributors to the central pool.
  • Bihar also contributed to some extent in the last season.
  • From 2011 to 2021, procurement for the central pool was between 25-40 per cent of the total wheat production. .
  • The procurement has doubled in the past one decade as 22.5 million tonnes of wheat was procured in 2011 and 43.3 million in 2021.

Procurement scale against the total production of wheat in India

  • In 2011 the total production of wheat was 88 million tonnes while it was around 109 million tonnes in 2021.
  • And the government’s procurement was 26% and around 40% in 2011 and 2021 respectively.
  • The procured grain is used for export purposes, the public distribution system and maintaining a particular stock for an emergency period.
  • The remaining 60% of the production goes to the bakery industry and other wheat-related businesses.
  • Farmers also keep some of this wheat for their self-consumption.

Share of wheat contribution of various states to the central pool

  • Barring 2020, Punjab has been the number one wheat contributor to the central pool.
  • The state has increased its contribution from 102.09 lakh tonnes in 2011 to 132. 22 lakh tonnes in 2021.
  • Haryana has also increased its contribution from 63.47 lakh tonnes to around 84.93 lakh tonnes in the same period.
  • Madhya Pradesh’s contribution was 35.38 lakh tonnes in 2011, which jumped to the highest among all states—129.42 lakh tonnes—in 2020 and was 128.16 lakh tonnes last year.
  • Uttar Pradesh’s contribution increased from 16.45 lakh tonnes to 56.41 lakh tonnes, and Rajasthan’s contribution rose from 4.76 lakh tonnes to 23.40 lakh tonnes in the same period.

Food Corporation of India

  • A statutory body set up in 1965 under the Food Corporations Act 1964.
  • Established against the backdrop of major shortage of grains, especially wheat.
  • Simultaneously, the Commission for Agricultural Costs and Prices (CACP) was created in 1965 to recommend remunerative prices to farmers.
  • It has the primary duty to undertake purchase, store, move/transport, distribute and sell food grains and other foodstuffs.
  • Objectives of FCI
    • To provide remunerative prices to farmers.
    • To help in transforming the crisis management oriented food security into a stable security system to ensure availability, accessibility and affordability of food grains to all people at all times so that no one, nowhere and at no time should go hungry.
    • Ensuring food security of the nation by maintaining satisfactory level of operational buffer stocks of food grains.
    • Distribution of food grains throughout the country for Public Distribution System.
    • Effective Price Support Operations for safeguarding the interest of farmers.

Commission for Agricultural Costs and Prices (CACP)

  • An expert body which recommends minimum support prices (MSPs) to the Government by taking into account cost of production, trends in domestic and international prices.
  • A panel under the Ministry of Agriculture
  • It makes the recommendations for MSPs for 22 kharif and rabi crops.
  • It also recommends FRP for sugarcane.
  • It came into existence in January 1965.
  • Its suggestions are not binding on the government.

Exam Track

Prelims Takeaway

  • CACP
  • FCI
  • PDS
  • E-procurement system
  • Digital mandis

Mains Track

Q. Critically analyse the efficacy of Targeted Public Distribution System and discuss what other steps can FCI take to ensure a transparent and an accountable PDS.