Farm min says policy flaw makes govt biggest wheat buyer, seeks CCI probe
Explaining how the public sector Food Corporation of India (FCI) was suffering from “diseconomies of scale” due to higher procurement incidentals like hefty state levies and largesse, the Commission for Agricultural Costs and Prices (CACP) has said in a recent note that the “FCI’s operations need to be contained, not expanded”.
While wheat production has risen from 78.6 million tonnes in 2007-08 to 94 million tonnes in 2011-12 (which in an undistorted market would have been more than enough for supply to match demand), the wholesale price of this key grain in the open market rose 20% year-on-year as per the October inflation data. Rampant procurement by FCI and other government agencies have created artificial scarcity in the market while also dissuading farmers, with the lure of the high minimum support prices (MSP), from cultivating other crops in demand like oilseeds, the rising imports of which have become a big burden on the exchequer and is fuelling inflation.
“Public monopoly is as bad as private one... This (unbridled procurement at inflated costs and keeping stocks well above the buffer level while infrastructure is decrepit) is not sustainable in the long run and could lead to a complete collapse of competition in
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