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Procurement of Wheat- UPSC Current Affairs

May 12, 2022

Procurement of wheat

Enhance your UPSC Preparation with our Daily Edition of Current Affairs Dialog Box. Today we will talk about the Procurement of Wheat in detail. Its relevance to the UPSC CSE syllabus is mentioned below:

For Prelims: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

For Mains: Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices.

Probable Question

How will Minimum Support Price (MSP) rescue the farmers from the low income trap? 

Key Points

About Procurement of Wheat

  • The Food Corporation of India (FCI), along with State Government Agencies (SGAs), procures wheat. 
  • The FCI’s wheat procurement system can be decentralised (DCP) or centralised (non-DCP).

Centralised Procurement System

  • Under the Centralised Procurement System, the procurement of foodgrains in Central Pool is undertaken either by FCI directly or by State Govt. Agencies (SGA)
    • Central Pool refers to stocks procured through MSP operations for welfare schemes and calamity relief. 
  • Quantity procured by SGAs is handed over to FCI for storage and subsequent issue against GoI (Government of India) allocations in the same State or movement of surplus stocks to other States. 
  • The Cost of the foodgrains procured by State agencies is reimbursed by FCI as per Provisional per cost-sheet issued by GOI as soon as the stocks are delivered to FCI.
  • In states like Punjab and Haryana, FCI/ state agencies procure wheat from farmers through arhtiyas (commission agents) as per the state APMC Act. 
  • In other states, Wheat (or Paddy) is procured directly from the farmers by FCI or SGAs.

Decentralised Procurement System

  • Under the Decentralised Procurement System, State governments or their agencies procure, store, and distribute — against the Centre’s allocation for the targeted public distribution system and Other welfare schemes (OWS) — rice, wheat, or coarse grains in the state.
  • The excess stocks (rice & wheat) procured by the State/ its agencies are handed over to FCI in the Central Pool. 
  • The expenditure incurred by the State Government on procurement, storage and distribution of DCP stocks are reimbursed by Government of India on the laid down principles.

Main Reasons for Low Procurement

  • Export Demand: In 2021-22, India exported a record 7.8 mt of wheat. Supply disruptions from the Russia-Ukraine war – the two countries account for over 28% of global wheat exports – have led to skyrocketing prices and a further increase in demand for Indian grain. 
  • Lower Production: The sudden spike in temperatures from the second half of March — when the crop was in the grain-filling stage, with the kernels still accumulating starch, protein and other dry matter — has taken a toll on yields. 
    • In most wheat-growing areas — barring Madhya Pradesh, where the crop is harvest-ready by mid-March — farmers have reported a 15-20% decline in per-acre yields

What is the Cost to the Government of Procurement?

  • The FCI defines economic cost as “the total cost”, including acquisition and distribution costs. 
  • It includes MSP and incidental costs of procurement, including state taxes, commission to arhtiyas or societies, cost of bagging materials, mandi labour, transportation to depot, etc.
  • The FCI has pegged the economic cost of wheat at Rs 2,588.70 per quintal for the current season.

Related Video:

Procurement of Food Grains & Minimum Support Price

  • The Government procures food grains — rice, wheat, and coarse grains — in order to ensure farmers receive the Minimum Support Price (MSP), and a stock is maintained to distribute to the poor under the Public Distribution System(PDS) and other schemes.
  • It buys wheat at the MSP, which it declares before the sowing of the crop every year on the recommendation of the Commission for Agricultural Cost and Prices (CACP). 
  • The MSP of wheat for the 2022-23 rabi marketing season is Rs 2,015 per quintal. States can pay bonuses over and above this MSP.
  • There is no statutory backing for MSPs, or any law mandating their implementation. 

Annual Requirement of Wheat for Government Schemes

  • The annual offtake from the central pool has been around 300 lakh tonnes for distribution under the National Food Security Act, 2013, and other welfare schemes during recent years. 
  • During 2021-22, total offtake stood at 294.70 lakh tonnes. Also, 187.18 lakh tonnes were lifted for programmes like the Pradhan Mantri Garib Kalyan Anna Yojana and Atma Nirbhar Bharat programme for migrant workers during 2021-22 amid the pandemic.
Minimum Support Price (MSP):

Simply put, the MSP for a crop is the price at which the government is supposed to procure/buy that crop from farmers if the market price falls below it.

MSPs provide a floor for market prices, and ensure that farmers receive a certain “minimum” remuneration so that their costs of cultivation (and some profit) can be recovered.

Using MSPs, the government incentivises the production of certain crops, thus ensuring that India does not run out of staple food grains.

Typically, MSPs create the benchmark for farm prices not just in those commodities for which they are announced, but also in crops that are substitutes.

Crops covered by MSPs include:

7 types of Cereals (paddy, wheat, maize, bajra, jowar, ragi and barley),

5 types of Pulses (chana, arhar/tur, urad, moong and masoor),

7 Oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower, niger seed),

4 Commercial crops (cotton, sugarcane, copra, raw jute)
News Source: The Indian Express

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