With the furore over the new laws governing marketing of agriculture produce threatening to erode its political capital, the Narendra Modi government seems to be slowing the pace of, if not abandoning, the all-important subsequent reforms in the sector.
On Wednesday, three top government officials – Union agriculture, food and textile secretaries – asserted that the policy of open-ended procurement (OEP) at minimum support prices would continue. Over the last few days, senior government functionaries have been assuring the farming community that the recent reforms won’t undermine the MSP system.
Expert bodies have long argued against open-ended purchases, as these distorted markets, hampered potentially remunerative exports and caused an enormous burden on the exchequer.
“We have an obligation to distribute grains and if we don’t procure what will we distribute?,” asked food secretary Sudhanshu Pandey, addressing media persons. Textile secretary Ravi Capoor said, “Our procurement (of cotton) is open-ended… there is no time limit, nor any quantitative limit. Cotton Corporation of India will continue to purchase as long as farmers are ready to sell.”
Ironically, the decision to continue with open-ended procurement policy comes on the heels of the fact that in its latest (rabi 2020) report, the committee of agricultural costs and prices (CACP) recommended that the system be reviewed. The CACP had in the past, too, pitched for direct procurement by private players, under the Private Procurement Stockist Scheme. “Due to increased procurement of wheat and rice in recent years, the government has emerged as the single largest buyer of food grains. In major wheat producing states like Madhya Pradesh, Punjab and Haryana, the government procures more than three-fourth of marketed surplus due to open-ended procurement policy. This policy is driving out private sector from the market and has adversely affected crop diversification,” the CACP wrote.
Thanks to the open-ended procurement policy that resulted in costly piling up of grain stocks, the Food Corporation of India’s (FCI’s) debt stood at a whopping Rs 3.3 lakh crore at FY20 end.
The total stocks of rice (including as paddy) and wheat in the central pool was about 97.27 million tonne (mt) as on June 1; the stocks have since fallen and stood at 81 mt (including 11 mt of paddy) on September 1, thanks to free-of-cost grains distribution under the Prime Minister Garib Kalyan Anna Yojana but was still much higher than buffer norm of 31 mt prescribed for October 1.
In the current fiscal, the budget outlay (BE) for food subsidy routed via FCI is Rs 77,983 crore, while another `1.36 lakh crore has been provisioned under the NSSF loan. As much as Rs 68,400 crore out of the NSSF loan has been accounted for, to repay the arrears and the balance Rs 67,600 crore is meant for meeting this year’s requirements.
Commenting on cotton procurement, Capoor said the Centre has targeted to procure 125 lakh bales (one bale weighs 170gm) this year, exceeding last year’s record 105 lakh bales for which Rs 35,000 crore has been earmarked as procurement cost. He said though procurement season peaks during November-July, cotton purchases have started in Haryana, Punjab and Rajasthan with 3 lakh bales, so far.
However, on procurement of oilseeds and pulses, agriculture secretary Sanjay Agarwal was non-committal, even though he said that procurement of pulses jumped 73% and that of oilseeds by 15% in terms of quantity in the last five years compared with the last five years of UPA.
The open-ended procurement means whatever food grains are offered by the farmers, within the stipulated procurement period and which conforms to the quality specifications prescribed by government of India, are purchased at MSP by the FCI and other agencies for the Central Pool.