Explained: How wheat is procured in India?


oi-Prakash KL


Published: Monday, May 16, 2022, 14:45 [IST]

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New Delhi, May 16: The Center on Sunday directed wheat-producing states and Union Territories (UTs) to continue procurement till May 31.

“To ensure that no wheat farmer faces inconvenience, Modi Sarkar extends wheat procurement season till 31 May 2022. We are committed to ensuring farm prosperity”, tweeted Piush Goyal, Union Minister for Food and Public Distribution.

Explained: How wheat is procured in India?

The government of India has amended the Export policy of wheat by putting its export under the “prohibited” category. Thus banning the wheat exports with “immediate effect”. “There is a sudden spike in the global prices of wheat arising out of many factors, as a result of which the food security of India, neighboring and other vulnerable countries are at risk,” said the Ministry in its notification.

So, how is wheat procured in India? Explained here:

The Food Corporation of India, the nodal central agency of the Government of India, along with other State Agencies undertakes procurement of wheat under the price support scheme. The procurement under Price Support is taken up mainly to ensure remunerative prices to the farmers for their produce which works as an incentive for achieving better production.

Before the harvest during each Rabi / Kharif Crop season, the Government of India announces the minimum support prices (MSP) for procurement on the basis of the recommendation of the Commission of Agricultural Costs and Prices (CACP) which along with other factors, takes into Consider the cost of various agricultural inputs and the reasonable margin for the farmers for their produce.

To facilitate procurement of food grains, FCI and various State Agencies in consultation with the State Government establishing a large number of purchase centers at various mandis and key points. The number of centers and their locations are decided by the State Governments, based on various parameters, so as to maximize the MSP operations.

For instance for wheat procurement, 21,106 procurement centers in RMS 2021-22 & 74,684 procurement centers for procurement of paddy in KMS 2020-21 were operated. Such extensive & effective price support operations have resulted in sustaining the income of farmers over a period and in providing the required impetus for higher investment in agriculture sector for improved productivity.

Whatever stocks which are brought to the Purchase centers falling within the Government of India’s specifications are purchased at the fixed support price. If the farmers get prices better than the support price from other buyers such as traders/millers etc., the farmers are free to sell their produce to them. FCI and the State Government/its agencies ensure that the farmers are not compelled to sell their produce below the support price.

Policy and System

The Central Government extends price support to wheat and paddy through FCI and State Agencies. Procurement at MSP is open-ended ie, whatever foodgrains are offered by the farmers, within the stipulated procurement period and which conforms to the quality specifications prescribed by the Government of India, are purchased at MSP (and bonus/incentive, if any) by the Government agencies including FCI for central pool. Some States also declare State bonus on wheat and paddy over and above MSP.

Government agencies undertake MSP operation at mandis/ temporary purchase centres/aggregation points. Location and number of purchase centers to be opened are decided in consultation with /by the state governments.

Systems of the Procurement:

Wheat – FCI undertakes procurement directly and jointly with SGAs in non-DCP states. In the major procuring states like Punjab, MP and Haryana, wheat is mainly procured by state agencies and they keep the stocks under their custody for which carry-over charges are paid to them.

FCI takes over the stocks for dispatching to other consuming states as per requirement /movement plan. Payments are made to State Govt. /agencies as per Provisional cost sheets issued by GOI after taking over the stocks. In the states like UP and Rajasthan, the wheat procured by state agencies is immediately taken over by FCI.

In DCP States like MP, State Government agencies procure, store and distribute wheat (against the Government of India’s allocation for TPDS/OWS etc) within the state. The excess stocks (wheat) procured by the state/its agencies are handed over to FCI in Central Pool for distribution/movement to deficit states.

Centralized and Decentralized procurement systems:

Centralized (Non-DCP) procurement system:

Under centralized procurement system, the procurement of foodgrains in Central Pool is undertaken either by FCI directly or by State Govt. Agencies (SGA). Quantity procured by SGAs is handed over to FCI for storage and subsequent issue against GOI allocations in the same state or movement of excess 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.

Decentralized (DCP) Procurement

Under DCP system, the State Government/ its agencies procure, store and distribute (against Government of India’s allocation for TPDS & OWS etc) rice /wheat/coarse grains within the state. 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 the Government of India on the laid down principles.

The 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 to the State Government/agencies as per the Government of India costs sheet.

States which contribute Wheat to the central pool

Madhya Pradesh, Punjab, Haryana, Uttar Pradesh and Rajasthan are the main contributors to the central pool although there are 15 states are in the list.

Story first published: Monday, May 16, 2022, 14:45 [IST]

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