Explained: How government procures wheat

The procurement of wheat is underway in several states. The government procures foodgrains — 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.

How is the procurement carried out?

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).

“Under centralized procurement system, the procurement of foodgrains in Central Pool is undertaken either by FCI directly or by State Govt. Agencies (SGA),” FCI says on its website. 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,” FCI says.

Under the centralized system, 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.

Under the decentralised procurement system, state governments or their agencies procure, store, and distribute — against the GoI’s allocation for the targeted public distribution system and other welfare schemes (OWS) — rice, wheat, or coarse grains in the state.

According to FCI, “The excess stocks (rice & wheat) procured by the State/ its agencies are handed over to FCI in 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.

“The expenses such as MSP, arhatiya/society commission, administrative charges, mandi labor charges, transportation charges, custody & maintenance charges, interest charges, gunny cost, milling charges and statutory taxes are reimbursed on an actual basis. The cost of excess stocks handed over to FCI is reimbursed by FCI…”

As per the portal, wheat is being procured under the DCP from eight states — Madhya Pradesh (since 1999-2000), Chhattisgarh (since 2001-02), Uttarakhand (since 2003-04), Gujarat (since 2004-05), West Bengal (since 2010-11), Bihar (since 2014-15), Punjab (since 2014-15), and Maharashtra (since 2020-21).

What is the price the government pays?

The government 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 paybonus over and above this MSP.

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MSPs are currently applicable on 23 farm commodities, including wheat and rice. However, there is no statutory backing for MSPs, or any law mandating their implementation. The farmers who led the year-long agitation against the three farm laws in 2020-21 wanted a legal guarantee for MSP, which the government declined to concede. Currently, the government carries out procurement for only some of the 23 of these commodities.

While procurement agencies ensure that stocks brought to mandis are purchased as per specifications, a farmer who gets a better price from a private player is free to sell elsewhere.

How is the quality of wheat ensured?

Farmers bring their produce to procurement centers and dump it in heaps. The quality control manager or technical assistant takes samples to check the quality. There have been concerns over the quality of wheat due to high temperatures in March. There have been complaints about shriveled grains in Punjab.

When does procurement take place?

It differs from state to state. During the current marketing season, procurement began on April 1 in eight states: Punjab, Haryana, UP, Rajasthan, Uttarakhand, Gujarat, Delhi, and Jammu and Kashmir. In MP, it started on March 15. In Himachal Pradesh and Bihar, it began on April 15 and April 20 respectively.

With the exception of 2020, Punjab has traditionally been the number 1 contributor to the central pool for wheat, having increased its contribution from 102.09 lakh tons in 2011 to 132. 22 lakh tons in 2021. Haryana’s contribution increased from 63.47 lakh tons to 84.93 lakh death. MP contributed the most in 2020 — 129.42 lakh tons.

What is the cost to the government?

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 artiyas or societies, cost of bagging materials, mandi labor, transportation to depot, etc. The FCI has pegged the economic cost of wheat at Rs 2,588.70 per quintal for the current season.

What is the target of wheat procurement during rabi marketing season 2022-23?

The government had set a target of procuring 444 lakh metric tons (LMT) of wheat, higher than last year’s 433.44 LMT. Of the target, 132 LMT is proposed to be procured from Punjab, followed by MP (129 LMT), Haryana (85 LMT), UP (60 LMT), Rajasthan (23 LMT), Bihar (10 LMT), Uttarakhand (2.2 LMT ), Gujarat (2 LMT), J&K (0.35 LMT), Himachal Pradesh (0.27 LMT) and Delhi (0.18 LMT).

How much has been procured till date?

According to the Ministry of Consumer Affairs, Food and Public Distribution, 69.24 LMT of wheat had been procured until April 17. However, data available on the Central Food Grains Procurement Portal shows 101 LMT wheat has been procured till April 20.

According to FCI records from 2011 to 2021, procurement for the central pool has been 25–40% of the total wheat production. Total production increased from 88 million tons in 2011 to around 109 million tons in 2021, and procurement doubled from 22.5 million tons to 43.3 million tons in 2021.

For the current rabi season, the Agriculture Ministry has pegged the wheat output at 111 million tons. However, there may be a shortfall due to the rise in temperatures in March.

How much buffer stock is needed?

As per norms that came into effect in January 2015, a buffer stock of 74.60 lakh tons of wheat should be maintained in the central pool as on April 1; 275.80 lakh tons on July 1; 205.20 lakh tons on October 1; and 138 lakh tons on January 1 every year. As per the latest available figures with FCI, wheat stock in the central pool stood at 189.8 LMT as on April 1, 2022, which is almost 2.5 times of the buffer stock requirement of 74.60 lakh tons.

What is the annual requirement of wheat for government schemes?

The annual offtake from the central pool has been around 300 lakh tons 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 tons. Also, 187.18 lakh tons were lifted for programs like the Pradhan Mantri Garib Kalyan Anna Yojana and Atma Nirbhar Bharat program for migrant workers during 2021-22 amid the pandemic.

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