Against the grain: Major rice producers least market-friendly

Written by fe Bureau | New Delhi | Updated: Apr 15 2014, 09:58am hrs
The states that contribute a major chunk of rice to the governments procurement drive have the least market-friendly policies when it comes to grain trade, as per a Commission for Agricultural Costs and Prices (CACP) report. Recommending improvement in the functioning of the market, the commission has suggested that instead of a price-centric minimum support price (MSP) policy, the focus should be on getting the market right and establish a single barrier free market with minimum controls.

Evaluating 18 states based on different parameters, the commission has accorded Gujarat, Assam, Himachal Pradesh, Bihar and Kerala the top five ranks for market friendliness in that order and clubbed them together in the green category. However, all these states contribute small to negligible quantities to the Centres rice procurement drive.

Uttarakhand, Madhya Pradesh, Uttar Pradesh, Odisha , Haryana, Punjab, Andhra Pradesh and Chhattisgarh have been put in the lowest (red) band, with their ranks in descending order.

Pertinently, these eight states contributed more than 28.6 million tonnes of rice to the central pool out of 34 million tonnes grain procured by the Food Corporation of India (FCI) in the 2011-12 marketing season, the commissions review period.

The CACPs ranking is based on the basis of taxes/levies on the MSP, bonus announced by state governments over MSP to farmers (which jacks up procurement cost) and rice procured compared to production, stock limits fixed, levy rice and the state of market reforms under the Agricultural Produce Market Committee (APMC) Act.

CACP, which advices the government on fixing MSP of around 22 agricultural crops annually, ranked Tamil Nadu, Karnataka, Maharashtra, West Bengal and Jharkhand in the median amber category as far as adoption of market-friendly policies are concerned.

State governments need to facilitate the setting up of adequate infrastructure such as storage facilities by the private sector, milling capacities... They also need to be discouraged from embarking on a high procurement mission, as it is detrimental to the competitive functioning of the product markets and discourages private sector participation, the CACP has noted.

The commission had also said the government must review its policy of following an open-ended procurement and limit its purchases to, say, only 75% of last years purchases, especially from states that levy bonus and high taxes.

s reported by FE earlier, key states that contribute a significant chunk to the central rice procurement drive have the highest tax burden on grain procurement, with Punjab levying 14.5%, followed by Andhra Pradesh (12.5%), Haryana (11.5%), Chhattisgarh (9.7%) and Odisha (12%).

Ashok Gulati, former chairman, CACP, had told FE that higher taxes and other statutory levies imposed by grain-procuring states distort and fragment the national market and drive away private sector participation from grain purchase, impacting the processing and value-added industry.