Presently, Government is following open-ended procurement policy to offer fair and remunerative prices to farmers and prevent them from distress sale. However, apart from making food grain management unsustainable, this policy has neither benefitted farmers nor agriculture.
Presently, there is no limit on procurement of food grains such as Rice and Wheat leading to higher procurement. For instance, Food grain stock of Rice and Wheat (65 MT) is almost 110% more than buffer stock requirements (30 MT).
IMPLICATIONS
- Higher economic cost for FCI (Rs 50,000 crores) leading to higher debt burden.
- Artificial scarcity of food grains in open market leading to increase in prices.
- Higher emphasis on procurement of water-intensive crops such as Rice and Wheat is adversely affecting agriculture- skewed cropping pattern, higher water usage, soil erosion, lack of diversification etc.
HOW TO ADDRESS THIS PROBLEM?
- Closed-Ended Procurement: The procurement system has to be made closed-ended and the FCI should be allowed to procure the commodities only up to a certain higher level over the buffer norms.
- Protect the farmers from distress Sale: Government must compensate the farmers for the loss by transferring the difference amount between the MSP and the price at which commodities have been sold.
- Strengthen Open Market Sales Scheme: FCI sells surplus stocks of wheat and rice under Open Market Sale Scheme at pre-determined prices through e-auction in the open market from time to time. This scheme has to be effectively used to dispose the surplus buffer stocks.
- Strengthen E-NAM: Presently, only around 1000 APMCs (14%) have integrated into E-NAM. There is a need to enhance penetration of E-NAM so that dependence of the farmers on the FCI for procurement reduces.
- Encourage Decentralised Procurement: Presently, under Decentralized Procurement Scheme (DCP), food grains are procured and distributed by the State Governments themselves (on behalf of FCI) under Targeted Public Distribution System (TPDS) and other welfare schemes of the Government of India. This scheme enables the FCI to reduce storage and transportation costs. There is a need to encourage more states to adopt this scheme.
- Encourage Private Sector Procurement: The Government must encourage the private sector for higher procurement of the agricultural commodities in order to reduce the burden on the FCI.