Procurement Reforms

AGRICULTURE / GOVERNANCE

• GS-3: Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security.
• GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Procurement Reforms

Context: Food Corporation of India (FCI) website shows that in October FCI was holding 86 million tonnes of grains (including unmilled paddy) against a buffer requirement (October 1) of 30 million tonnes. 

• Last year’s procurement led to FCI holding a record quantity of grains in June-July thus year.
• During pandemic year, government raised the offtake of foodgrains from 65 million tonnes annually to 93 million tonnes (increased provision under PM Garib Kalyan Yojana) 

What are the issues with FCI procurement?

• Against a 65 million tonne annual requirement of foodgrains for distribution under the National Food Security Act, such massive procurement, is not only wasteful (given the lack of storage capacity) but also risks making India’s procurement for food security seem market-distortionary.
• Even though the FCI has been conducting open market auctions for part of its excess holdings, this is hardly enough to take care of the problem of excess.
• Export is obviously no route to liquidate the excess stock since WTO norms against market-distortion would kick in.
• Paddy/rice seems the main culprit—especially procurement from Punjab—with severe economic and environmental consequences.

Short of giving the grains away, there seems to be little that can be done—unless, of course, a policy correction is made.

What policy correction is required?

• The government can keep procuring to keep a handful of farmers in two/three states happy and perhaps donate surpluses to food programmes locally and overseas. 
• Or Government can dilute the MSP’s appeal and move to end open procurement.
• A “micro-analysis of state-wise requirements and buffer norms” being done by the FCI should be expedited
• Another way to minimise the pain would be to limit open-ended procurement, say, by capping procurement as per size of individual land-holding.
• Government can also move to a pure cost-support regime but this will need significant political will, given rich and influential farmers’ addiction to price-support.
• Centre and Punjab must work together to incentivise the state’s farmers to switch from paddy to maize and even fruit and vegetables.

Conclusion

Without the above mentioned reforms, FCI’s burden will only grow.

Connecting the dots:

• PM Garib Kalyan Yojana
• New Agricultural Bills and Opposition to it