Procurement of wheat

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Wheat procurement is underway in various states of India.

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• The Central government pays the minimum support price (MSP) announced beforehand for the crop.
• States do the procurement under two systems— the centralised one, also called non-decentralised procurement system (non-DCP) and the decentralised one, also called DCP.
• There are 15 states on the procurement list for the central pool, but the contributions from seven of the states are negligible.
• Among states, only Punjab, Haryana, Madhya Pradesh, Uttar Pradesh and Rajasthan are the main contributors to the central pool.
• Procurement agencies ensure that the stocks brought to mandis are purchased as per the specifications fixed by the government and farmers are not compelled to sell their crop below the MSP. But if a farmer gets a better price from private players, he/she can sell to them.
• The main purpose of procuring for the central pool is ensuring the MSP as well as the country’s food security by making food available to the weaker sections at affordable prices.

How does the government procure wheat?

• Procurement: Under the first system, the Food Corporation of India (FCI) directly or through state government agencies procure wheat from the purchase centres established across the states based on various parameters like moisture, lustre, broken/shrivelled etc.
  • Arhatiyas: In Punjab and Haryana, farmers sell their crop to the central agency or state agencies through arhtiyas (commission agents).
• Support price: Minimum Support Price is announced by the government before the Rabi harvesting on the recommendations of the Commission for Agriculture Cost and Price and other factors.
  • Reimbursement: Centre also reimburses the arhtiyas’ commission, administrative charges, mandi labour charges, transportation charges, custody and maintenance charges, interest charges, the gunny bag cost and statutory taxes. 
  • Excess stock: The cost of excess stocks handed over to the FCI is reimbursed to the state government or agencies as per the Centre’s policies.
• Storage: The wheat procured by the state agencies is handed over to the FCI for storage or for transportation to the consuming states.
• Logistic costs: The FCI, which is the central nodal agency for wheat procurement, pays the cost of procured wheat to the state agencies.

How much wheat is procured for the central pool by the FCI every year?

• Share: According to the records of the FCI, from 2011 to 2021, procurement for the central pool was between 25-40 per cent of the total wheat production.
  • Growth: The procurement has doubled in the past one decade as 22.5 million tonnes of wheat was procured in 2011 and 43.3 million in 2021.
• Scale of procurement: In 2011 the total production of wheat was 88 million tonnes while it was around 109 million tonnes in 2021.
  • Share: The government’s procurement was 26 per cent and around 40 per cent in 2011 and 2021
• Use of procurement: The procured grain is used for export purposes, the public distribution system and maintaining a particular stock for an emergency period.
  • The remaining 60 per cent of the production goes to the bakery industry and other wheat-related businesses. Farmers also keep some of this wheat for their self-consumption.
• Share of wheat contribution of various states:
  • Top state: Punjab has been the number one wheat contributor to the central pool with annual contribution of 22 lakh tonnes in 2021 alone.
  • Other states: Madhya Pradesh’s contribution has jumped to the highest among all states at 129.42 lakh tonnes—in 2020.

Sources:

• How central and state governments procure wheat: the process, scale and share: