Larger role for private players could be challenging
Involving the private sector in procurement of foodgrain at MSP has been in the works but the experience is not encouraging
Last week, the NITI Aayog, along with representatives from the state governments and central ministries, discussed various options to ensure farmers get the right price for their produce, something that Finance Minister Arun Jaitley had announced in his 2018-19 Budget speech.
Among the various options that were discussed, according to an official statement released after the meeting, procurement by private players at the minimum support price (MSP), in lieu of a commission, offered ‘great promise’.
In fact, NITI Aayog Vice-Chairman Rajiv Kumar was of the opinion that some sort of commission should be given to private procurement agencies, if they procure on the government's behalf and abide by all other rules of engagement.
The Aayog is expected to firm up its suggestions by the month-end.
However, involving private players in procurement of foodgrain at MSP has been in the works for the past several years and despite their best efforts, the experience hasn't been very encouraging.
Asking private players to procure commodities other than wheat and rice on behalf of the government has its own challenges, which includes storing and transportation. Many say the concept itself is fraught with dangers and could minimise the role of the Food Corporation of India (FCI) in procurement operations.
At best, private sector agencies could play a supplementary role in procurement alongside the FCI, in places where it is weak, but that would only be for wheat and rice — something that in any case has been going on for some time now, with limited success.
The first attempt to involve the private sector was made in 2008 when the FCI engaged the National Collateral Management Services Limited (NCMSL, now known as NCML) and National Bulk Handling Corporation (NBHC) for procurement of paddy in Odisha and some other states.
In 2016-17, the Centre along with the FCI again roped in the private sector for procurement of paddy in eastern India, where the procurement process was weak. This time, it was slightly more structured and modalities were worked out in a little more detail.
Three private players, including NCML, were roped in for rice procurement on cluster basis in Uttar Pradesh, Jharkhand and West Bengal. The other two firms were Veerprabhu Marketing and Farmers Fortune (India).
Food Minister Ram Vilas Paswan, in a written reply to the Rajya Sabha, had then stated that according to the norms framed, private companies are bound to furnish daily procurement reports to FCI, which has the right to inspect purchase centres, storage points and miller premises. FCI was to conduct quality checks on rice at the time of acceptance at its depots.
Paswan had said the FCI would evaluate the performance of private players and impose commensurate penalty on them for acts of omissions and commissions.
The success or failure of these experiments is still being evaluated.
Moreover, the bulk of these purchases were for wheat and rice, for which the FCI and others have adequate storage capacity.
If the same operations are extended to include other commodities, such as pulses or oilseeds, storage could be a big challenge.
“However, if other commodities are to be procured at MSP, there will surely be shortage of space in almost all the states as the storage requirement assessed by FCI for each district took into account only the procurement of wheat and paddy," Shiraz Husain, former agriculture secretary and chairman of FCI told Business Standard.
"One thing to be remembered is that the private sector won't procure wheat, rice or any other commodity at MSP for free and if their commission is less than cost, then they won't come. Also, where is the storage? I feel this government has woken up quite late on reforming the farm sector, after much damage has already been done," Ashok Gulati, Infosys Chair Professor for Agriculture in ICRIER said.
Devendra Sharma, noted food policy expert, said no private sector player would venture into purchasing farm goods at MSP on the behalf of the government and at a time when MSP-based procurement is limited to just wheat and rice. "If they were so efficient, Indian agriculture would not have been passing through such difficult times," Sharma said.
He said one pre-requisite of private sector participation in procurement is reforming the Agriculture Produce Market Committee (APMCs), which in itself is a failed model globally and opens the door for private sector monopoly in farm marketing.
"A better idea is to adopt the cooperative model for farm marketing," Sharma said.
However, there are supporters of the idea, Chairman of Bharat Krishak Samaj, Ajay Vir Jakhar in a tweet seemed to support the idea in places where government procurement is absent to ensure that atleast farmers get MSP.