My Editorial Page article on MSP and Storage Systems has been published in The Tribune today, the 5th December,2014 Invest in Silos for Food Storage The MSP, Procurement Systems need a careful review S. S. Johl Government of India has set up a committee under the chairmanship of Sh. Shanta Kumar Ex Member of Parliament to review the MSP regime and the procurement as well as storage systems. Sh. Shanta Kumar has rightly observed that the MSP regime benefits only 8 percent of the farmers. Another aspect of the issue is that the scheme benefits most the larger farmers with substantive marketable surpluses. Small farmers get very little benefit because they have only small quantities to sell. Many of them make distress sales in order to retire their immediate financial obligations and quite often have to buy the same produce in the lean period at higher price. Further, besides its other shortcomings, the MSP de facto protects mainly the interests of the farmers that produce wheat and rice and to some extent of the cotton producers. It is not that MSP is not determined and announced by the government for other commodities. There are some two dozen agricultural commodities for which the MSP is announced routinely. Yet, MSP regime can be effective only for those commodities that can be stored for a period upto the next crop season. Perishable and semi-perishable commodities suffer from this limitation. It has been seen that many often if even semi-perishable commodities like potatoes are excessively stored due to low market prices prevailing in the harvest season; it runs into losses when disposed of in the lean period. It is only the commodities like apple that pay to procure and store when disposed of in the lean period, that too if the storage is appropriately done. Minimum support price system was designed primarily to keep the farmers in business, protecting them from price slumps and exploitation in the market due to their weak bargaining position. This became absolutely necessary when the nation needed boost in domestic production of food grains in the green revolution period. This policy support was indispensible in view of the country suffering from food grain shortages. At the same time it was also necessary to protect the interests of the consumers through the system of issue prices and public distribution system (PDS). Third objective of the scheme was to continuously keep adjusting the agricultural production patterns to the changing consumption pattern in the country. Unfortunately the system suffered on all these accounts because of the distortions introduced out of political considerations. Agricultural Prices Commission, later on rechristened as Commission for Agricultural Costs and Prices (CACP), also did not give due importance to the prices of commodities other than wheat and rice or to some extent cotton. NAFED that was made nodal agency for coarse food grains, never operated effectively. Cotton Corporation of India purchased cotton for government factories only. Even in case of Sugarcane, prices announced were of advisory nature based on which government determined the levy price of sugar. It was left to the states to announce their own state prices for the crop. For commodities like oilseeds and pulses the shortages were preferred to be met through imports, rather than encouraging the farmers through remunerative prices with matching procurement. Whenever and wherever the farmers produced these commodities in substantial quantities, they got discouraged at the door steps of the market and government never came to their rescue even at the announced MSP level, not to speak of higher procurement prices. Thus the MSP regime never provided the farmers with conducive market environment to move from wheat and rice crops to other crops in the major producing areas of the country, thereby negating the declared objective of adjustment of agricultural production patterns to the changing consumption pattern in the country. Also, the fact remains that as the farmer substitutes other crops for wheat and rice, he is faced with serious production uncertainties and overly market risks. Hence a serious mismatch has occurred between what the consumers need and the farmers produce leading to the wastage of food grains due to the supply increasing demand and lack of adequate scientific storage for excessive stocks and also considerable losses in handling, transporting and exporting of food grains at low prices in the international market. The need of the hour is to make handsome investment in scientific metallic silo storage on a priority basis with matching dedicated transporting facilities through bulk handling railway wagons within the network of nodal storage facilities. It is immaterial whether the FCI handles or the private sector is involved in the process. Unbundling of FCI and making it responsible for buffer stocks only and handing over the storage to the warehousing corporation appears to be quite a sensible proposition. Yet important aspects of coordination would require to be looked into carefully, because of the Indian bureaucratic mind set of building empires around them and passing the buck. Making the states solely responsible for procurement would be the right step only when the states work as agents of the warehousing corporation responsible for storage of the commodities. The FCI, responsible for administration of buffer stocks, should also be responsible for allocations of exports as well as public distribution system. An alternative is to have a separate organization for handling the public distribution system that should directly draw stocks from the warehousing corporation. Storage in totality should remain with the warehousing corporation that should develop adequate scientific silo storages, may be in partnership with the private sector. The FCI administered buffer stocks should be made renewable on a yearly basis. These stocks should be drawn upon only in case of shortages or for export purposes. Financial aspects may be handled through the warehousing corporation which should reimburse the states as their procurement agents for the food grains handed over to it within one week of procurement. These funds should be passed on to the farmers immediately. For this purpose revolving funds can be created with the states. No stocks should be held on states’ account for more than a couple of days. For efficient management primary emphasis should be placed on strategically located adequate scientific storage facilities and financial provisions to keep the wheels of the system moving smoothly.
Posted on: Fri, 05 Dec 2014 10:12:02 +0000
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