Wheat procurement figures have been among the rare economic good news for the UPA. Total procurement by FCI and state agencies has crossed 21 million tonnes, almost double the amount procured last year. The phenomenal rise, expected to meet government requirements for both PDS and buffer stock, has been attributed to a bumper crop harvest and to a higher minimum support price?the government set a price of Rs 1,000 per quintal this year, compared with Rs 750 per quintal in the last year. This level of procurement, achieved in about one month, is expected to rule out any necessity to import wheat. In 2007, India had imported 1.8 million tonnes of wheat, and in 2006 it had imported 5.5 million tonnes; procurements in those years were 11 million tonnes and 9.2 million tonnes, respectively. Imported wheat is more expensive than that produced domestically.
What, however, remains hidden behind the record numbers is the sharp decline in private purchase of wheat stocks. The higher government support prices when added together with VAT and commission for agents?FCI decided to give 2.5% commission to agents in UP, for example?have made the purchase of wheat less attractive to private players. In plain English, the government has successfully subverted the market this year?in early May, only 7% of stocks arriving at mandis was on account of private purchase, down from 22% the previous year. The government?s euphoria on procurement comes at a substantial cost to the taxpayer. There are also problems in storing such bumper procurements. FCI is fabled for letting stocks rot. At any rate, it makes little sense for the government to completely drive out market forces from agriculture. It is likely to disrupt the equilibrium between demand and supply in the longer run and affect prices adversely. Seeking a procurement record should not be the end of government policy. Ensuring that market forces find a price for consumer and farmers, that stocks are not wasted and that taxpayers are not burdened with a big support price bill should be the final objective. For all of this, private players must play a bigger role.