Farmers may dump FCI for firms

Companies offering much more for wheat than govt's Rs 850 a quintal.

A bonanza awaits the farmers of Punjab and Haryana, the country's cereal bowl, when they bring their wheat crop to the market this week.

A clutch of private companies and their agents have fanned out in villages offering significantly higher prices for their produce than the government's procurement agencies.

The government has raised the support price for this year to Rs 850 a quintal, which includes a Rs-100 bonus, from Rs 650 last year. Private companies, on the other hand, are learnt to be offering much more "� as much as Rs 1,050 a quintal to farmers in Patiala district of Punjab.

Aggressive buying by companies is likely to dent, for the second year in a row, the purchase of wheat by the Food Corporation of India (FCI), which feeds the public distribution system for economically weaker sections of society and intervenes in the open market to stabilise prices.

In 2006-07, the FCI was able to procure only 9.2 million tonnes of wheat, against 14.8 million tonnes in 2005-06.

The corporation is targeting a procurement of 15 million tonnes this year (the crop output is expected to rise to 72.5 million tonnes from 69.5 million tonnes last year), but experts feel it could be an uphill task now.

Companies like ITC and Cargill have drawn up plans to buy large quantities of wheat this season, though the Australian Wheat Board has decided to stay out of Punjab and Haryana.

"We will start once the arrivals at the mandis begin. Initially, the intent will be to buy at the minimum support prices. Thereafter, it depends on the market," said S Sivakumar, chief executive of ITC's agribusiness.

Last year, ITC bought 600,000 tonnes of wheat to meet its requirement for flour and biscuits.

The competition from the private sector in the mandis has intensified because these companies are also prepared to pick up the wheat from farmers' doorsteps, saving them transport and storage costs.

Last year too, private companies bought a sizeable chunk of the produce from the market.

For instance, of the 8.12 million tonnes of wheat sold in Punjab last year through the mandis, private traders bought 1.17 million tonnes "� almost 15 per cent. Companies are known to have bought another 1 million tonne directly from farmers.

And this happened when the private traders offered just Rs 20-50 more than the support price of Rs 650 a quintal. With the same people prepared to up the price substantially this year, a large chunk of the 14.5 million tonnes of the state's wheat crop could find its way to the silos of the private sector.

The Punjab unit of Bhartiya Kisan Union (Lakhowal) today said farmers of the state would boycott the grain markets if the Centre failed to increase the minimum support price of wheat to Rs 1,140 per quintal.

With rural vote banks in Punjab and Haryana strongly entrenched, any move to keep companies and private traders out of the market is being resisted.

Late last week, Union Agriculture Minister Sharad Pawar said there was no move to bar private companies including multinationals from buying wheat in the markets, bringing relief to farmers and traders alike.

Earlier, apprehensions that the Centre may restrict sales to FCI had generated such political heat that Punjab Chief Minister Parkash Singh Badal told the state Assembly that the Congress-led government in New Delhi had no business to undertake such a step. His agriculture minister, Sucha Singh Langah, said farmers should sell their produce to the highest bidder, not just government agencies.

Leading farmer associations have also come out strongly in support of traders. In fact, All India Kisan Coordination Committee chief Bhupinder Singh Mann and Shetkari Sangathan leader and Member of Parliament Sharad Joshi have asked farmers to boycott FCI for the first 45 days of procurement.