GOVERNMENT PROCUREMENT OF CROPS

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Context

The procurement of wheat in the 2022-23 Rabi marketing season is in progress in a number of states.

Why does the Government procure?

The government procures foodgrains — rice, wheat, and coarse grains — in order to ensure farmers receive the minimum support price (MSP).
It does so to also ensure that 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).

Centralised Procurement System

Under centralised procurement system, the procurement of foodgrains in Central Pool is undertaken either by Food Corporation of India 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 Government of India’s 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.
Under the centralised 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.

Decentralised Procurement System

Under the decentralised procurement system, state governments or their agencies procure, store, and distribute for the targeted public distribution system and other welfare schemes (OWS). They distribute 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 Central Pool.
The expenditure incurred by the State Government on procurement, storage and distribution of Decentralized Procurement System stocks are reimbursed by Government of India.
The expenses such as MSP, arhatiya/society commission, administrative charges, mandi labour charges, transportation charges, custody & maintenance charges, interest charges, gunny cost, milling charges and statutory taxes are reimbursed on actual basis. The cost of excess stocks handed over to FCI is reimbursed by FCI.

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).
MSPs are currently applicable on 23 farm commodities.

However, there is no statutory backing for MSPs, or any law mandating their implementation.

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 arhtiyas or societies, cost of bagging materials, mandi labour, transportation to depot,

Must Read: https://www.iasgyan.in/daily-current-affairs/msp-to-farmers