Will alterations proposed to the cereal procurement system benefit the producer or the middleman?


Finance Minister P Chidambaram has now called for private players to participate in foodgrain procurement:

p chidambaram“The government is the largest and in many ways the only bulk buyer of cereal crops. The discovery of market prices is affected by minimum support price.” By opening to the private sector, the Finance Minister thinks procurement will improve as it will benefit both the consumers as well as the farmers.

Devinder Sharma warns that any attempt to ‘tinker’ with the procurement system will have grave implications for the farming population as well as the country’s food security – the food self-sufficiency assiduously built over the past four decades. He writes:

“The government constituted the Agricultural Prices Commission soon after the Green Revolution was ushered in 1966. At the same time it set up the Food Corporation of India. Both these were excellent initiatives and what needs to be understood is that if the country has stopped food imports and turned food self-sufficient it is primarily for the role played by these two organisations in providing an assured price and an assured market to farmers . . .

“Mr Chidambaram gives the impression that procurement of wheat and rice by the government agencies crowds out the private players, who would have paid a better price to farmers. This is not true . . . Private players too can come and make purchases from the mandis. Only when there are no buyers for wheat, for instance, at the procurement price of Rs 1350 per quintal it becomes mandatory for the FCI to purchase the produce”.

Mr Chidambaram, a corporate lawyer, appears to be at odds on the subject of procurement with the agriculture minister

In January, the Union Agriculture Minister Sharad Pawar urged the Kerala Government to procure coconuts to ensure better price for farmers. Last year he said Bengal should increase its rice procurement (currently only 13%) to ensure a proper price for farmers. 

Another problem looming on the horizon?

CHSUK members can only add a warning about the proposed increase in activity by large foreign retail chains in India. Our experience is that small and medium producers are given a very low price for food: in the case of milk not even covering production costs. Their produce is then sold to the public at a far higher price, with the supermarket taking unfairly high profit margins. Food producers only survive because EU subsidies are given –enabling supermarkets to get away with giving an unfair price.

Will this happen in India?


Read Devinder Sharma’s article here: Ground Reality


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