FCI’s wheat purchases at brisk pace amid outcry over ‘end of MSP’

April 27, 2021 2:45 AM

Wheat procurement this year started a fortnight earlier than normal in Madhya Pradesh, Rajasthan and Gujarat. Though procurement will end in June, bulk of the purchases occur in first two months.

Going by the pace of procurement and prevailing low market rates, the government may end up buying more than the target, which will put pressure on it to liquidate the stocks.Going by the pace of procurement and prevailing low market rates, the government may end up buying more than the target, which will put pressure on it to liquidate the stocks.

By Prabhudatta Mishra

Even as sections of the farming community are fearing that new farm laws would destroy the minimum support price (MSP ) system, the country is geared up for record wheat procurement at MSP in the current rabi season.

In less than a month since the season began (rabi purchases usually begin in early April and typically last for a little over three months), purchases of wheat, the key rabi cereal, by the official procurement agencies crossed the halfway mark against the target set for the season.
Going by the pace of procurement and prevailing low market rates, the government may end up buying more than the target, which will put pressure on it to liquidate the stocks.

This time around, the funds are being transferred directly to the farmers’ bank accounts, throughout the country. Even Punjab joined the system, ending initial confusion over the manner of paying MSP to farmers in the state due to the state government’s reluctance to embracing the direct bank transfer system.

So far, the Food Corporation of India (FCI) and state agencies have purchased 22.23 million tonne (MT) of wheat, as against 7.76 MT during corresponding period of last year, according to food ministry sources. The purchases, as is the pattern, has been the highest in Punjab (8.4 MT or 37.8% of the target) despite a late start from April 10, followed by Haryana (7.2 MT, 32.27%) and Madhya Pradesh (5.2 MT, 23.2%). The procurement in Uttar Pradesh, the biggest producer of wheat, stands at 0.77 MT, higher than year-ago period. Wheat procurement last year started a fortnight late from its normal schedule of April 1 due to the lockdown and pace was slow because of social-distancing norms.

About Rs 8,180 crore has already been transferred directly into farmers’ accounts in Punjab and about Rs 4,668 crore in Haryana. About 21.17 lakh wheat farmers have already been benefitted from the ongoing procurement operation across the country. The MSP value of wheat crops purchased in the country so far in the current season is about Rs 43,912 crore.

“Due to lower demand, the market rates in western Uttar Pradesh are around Rs 1,790-1,800 per quintal as against minimum support price of Rs 1,975. Farmers want to sell to government agencies, but to avail immediate cash many of them are selling in mandis at below MSP. With the recent announcement of free foodgrains through ration shops, the demand may further reduce and impact wheat prices,” said Pawan Agarwal, a trader in Garh Mukteswar in UP.

In view of a record wheat production of 109.24 MT in the country during 2020-21 crop year (July-June), the government has set a target to buy 42.74 MT for the central pool, which is nearly 10% more than actual quantity purchased last year.

Wheat procurement this year started a fortnight earlier than normal in Madhya Pradesh, Rajasthan and Gujarat. Though procurement will end in June, bulk of the purchases occur in first two months.

According to FCI, the official reserves had 27.3 MT of wheat as on April 1, which is nearly four times the buffer norm of 7.5 MT. As the government has decided to release additional 8 MT of foodgrains under Prime Minister Garib Kalyan Anna Yojana (PMGKAY) during May-June, sources said that demand for wheat will be not more than 20% as most states prefer to distribute rice. Even if the scheme is extended further, the offtake of wheat may not be that high, the sources said.

Meanwhile, as Haryana and Punjab switched from indirect payment of MSP to direct online transfer of benefits to farmers’ bank account from this year, farmers have expressed satisfaction in these states. Earlier, farmers used to receive their payment through Arhatiyas (commission agents), who were deducting their loan advance and paying the balance amount to farmers.

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