• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Harish Damodaran

NEW DELHI, Jan. 25

THE Centre's proposed direct income support scheme for farmers to replace the existing minimum support price (MSP)-based system of official foodgrain procurement appears to be a non-starter in the coming rabi marketing season, beginning April. This is notwithstanding the Union Minister for Consumer Affairs, Food and Public Distribution, Mr Shanta Kumar's public pronouncements about the Government's intention to kick-start the scheme as early as possible to prevent a further build-up of grain inventories in the Food Corporation of India's (FCI) godowns.

Recently, the Minister had noted that the phenomenon of Government agencies ``waiting with gunny bags and procuring every tonne of grain arriving in the market'' was a ``contradiction'' and buying and selling of grains was a job ``that should be left to the private trade''. He said the Government favoured moving over to a system of direct income support, in which the MSP was delinked from Governmental procurement and farmers would be reimbursed the positive difference, if any, between the MSP and the market price. But his own Ministry officials were in complete variance to Mr Shanta Kumar's stance at a meeting of the State Food Secretaries convened here on Wednesday. At the meeting, it was projected that procurement of wheat during the 2002-03 rabi marketing season (April-June) would touch 230 lakh tonnes (lt), which is more than even the record 206.30 lt purchased during the previous season.

According to an official release, the Ministry ``has made all necessary arrangements for a smooth procurement operation during the ensuing rabi marketing season, including finalisation of purchase centres, mandi distribution and arrangement of storage etc'' and ``control rooms will be set up in the Ministry, FCI and also in States for daily reporting of distress sale if any''.

Official sources told Business Line that the decision to persist with official procurement has been partly due to the high-level committee (HLC) on long-term grain policy under Prof Abhijit Sen not yet submitting its report to the Government. The Ministry had, in November, extended the HLC's terms of reference to examine the feasibility of `delinking' the MSP from Governmental procurement operations and implementing a direct income support scheme for farmers.

The sources said the Government's initial plan was to launch the alternate `Income Insurance Scheme' (IIS) prior to the State Assembly elections in Punjab and Uttar Pradesh. ``This is ruled out now because any concrete plan has to wait for the HLC's inputs on the scheme's feasibility. The Committee is likely to submit its report only after the first week of February, which means the scheme cannot be launched before the elections'', they added.

What has complicated the picture further is the position of the HLC itself. In its interim report, submitted in late-April last year, the Committee had not favoured continuing with the existing MSP-based grain procurement system, but even recommended that its operations be extended to cover all surplus States. Although the HLC is understood to be under tremendous pressure to revise its views, the maximum it is willing to concede is to rationalise the MSP of crops to more realistic levels.

The sources said while the Committee members welcomed introduction of an IIS wherever it was feasible, they, however, felt that it could not replace the existing system altogether at this stage and the Government would have to continue to undertake procurement operations even if it meant paying a lower MSP. They also questioned the viability of providing cash compensation to the country's 11 crore-odd operational holdings.

As on December 1, 2001, the total foodgrain stocks with FCI stood at 591.50 lt, comprising 340.06 lt of wheat and 250.97 lt of rice. The stocks are expected to hover around this level till the end of the current fiscal. If wheat procurement in the new season does touch 230 lt as being projected and offtake levels remain at current levels, the total stocks would cross the 750-lt mark by July 1, 2002.

The only ray of hope for the Centre now stems from the fact that by the time the new wheat crop arrives in the market, the elections in Punjab and UP would already have been completed and the political pressures to undertake procurement would have subsided by then.

Send this article to Friends by E-Mail

Stories in this Section
HLL to expand wheat project

Copyright © 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line