Madhya Pradesh versus Punjab: Who is ahead in the wheat procurement game?

Lower taxes and a slew of incentives give MP and edge over the traditional wheat bowl. However, Punjab wins hands down on yield

A few days back, Madhya Pradesh surpassed Punjab as the country’s biggest wheat procuring state. By the time the purchase season ends , MP would have, in all likelihood, purchased around 13 million tonnes of wheat this season. 

Till June 15, it had purchased some 12.9 million tonnes of wheat, as per the state government while Punjab has closed its annual procurement for this year at 12.71 million tonnes. 

Of this, according to the Madhya Pradesh state, almost 97 per cent has already been transported to safer destinations during the past few days.

Storage challenges 

That said, such an enormous procurement has posed serious storage problems for the state, with some media reports saying that almost 200,000-300,000 tonnes of wheat was lying in the open till a few days back. However, the state government is confident that by the time purchases finally stop, it will be able to store all the procured wheat safely in warehouses.

Three factors have compunded the problem for MP. These are: the late start to procurement due to the Covid-19 lockdown, unexpected surge in wheat arrivals due to bumper harvest, and early arrival of southwest monsoon in the main wheat growing parts of the state.

However, according to local farm leaders there is also some element of mismanagement which has caused the storage problem.

“In order to ensure that maximum quantities of wheat are procured from farmers this year, the state government opened procurement centres in the fields, which never had adequate storage facilities as most of purchases in MP are done through cooperative societies which are normally under financial stress,” Rahul Raj, state president of Rashtriya Kisan Mazdoor Sangathan told Business Standard from Bhopal.

Sheo Shekhar Shukla, Madhya Pradesh principle secretary of food and civil supplies, told Business Standard recently that it normally takes around 15 days from the procurement closing date to bag and store the entire wheat in godowns, but this year the state has maintained 85-90 per cent efficiency in transportation right from the first day of procurement.

Shukla added that there is no storage crisis, despite the high levels of procurement, as over 2,000 godowns and other facilities available with the state have been properly mapped and linked with the procurement centres.

“It’s only in the fag end that there is long haul for trucks due to which their turnaround time decreases,” he said.

Usually, around one million farmers sell wheat in Madhya Pradesh to the government for its MSP purchases, but this year the number rose by almost 60 per cent as private buying was negligible.

Shukla said the state had a fair idea of the spike in procurement quantities and had raised the number of procurement centres by almost 28 per cent over previous years.

It also converted 30-40 godowns into procurement centres to obviate the delay in transportation, while till last year 2-4 per cent of the procurement centres were converted into godowns.

The claims notwithstanding, storage is becoming a huge problem in the state, largely at a time when it is scheduled to go for by-elections in the seats vacated by dissident Congress MLAs.

The Opposition Congress, which lost power to BJP before the lockdown, is trying to make the storage problem a big issue, portraying it as mismanagement in the state.

Where MP scores over Punjab

Madhya Pradesh, with its low taxes on procurement and massive rise in production, which is supported by a robust, largely digitised procurement machinery, has been challenging Punjab and Haryana as one of the foremost contributors of wheat to the Central pool for quite some time now.

Before this year, the state’s highest wheat procurement was in the 2012-13 season, when it purchased 8.5 million tonnes of wheat for the Central pool, quite near the quantity Haryana purchased that year.

But a critical difference between the procurement of pre-2014-15 level and now, is that much of sharp rise in procurement, when purchases jumped by almost 70 per cent in a span of two years (i.e between the 2011-12 and 2012-13 marketing seasons), was attributed to the bonus that MP gave over and above the Central procurement rates. This lured farmers away from private buyers to government agencies.

In fact, in those years, there were even allegations that farmers from neighbouring Rajasthan were selling wheat in MP to get the benefit of higher remuneration in those days.

The procurement in the 2020-21 season hasn’t been aided by any extra bonus paid by the state but, as some experts said, it has been largely due to the near absence of private traders who could not buy wheat due to the closure of mandis.

The tax benefit: The Commission for Agricultural Costs and Prices (CACP) in its latest rabi report noted that in 2019-20, the statutory taxes (mandi tax/APMC cess + arthiya commission) levied on wheat in Punjab and Haryana were in the range of 5.5 per cent and 4.5 per cent. In other States like Uttar Pradesh and Madhya Pradesh it was lower at 2.5 per cent and 2 per cent.

This tax rises further when states levy incidentals such as rural development and infrastructure development cess, commission to society, ‘nirashrit shulk,’ (sort of destitute fee) ‘mopari charges’ etc.

In totality, when all charges are included, a tax of about 8.5 per cent is levied for procuring wheat in Punjab, while it is just 3.75 per cent in Madhya Pradesh, which is among the lowest among states.

Clearly, when it comes to cost advantage, MP provides a better option for purchasers than Punjab, as taxes there are low.

This has also raised fears among a section of traders and commission agents in Punjab that if the Centre continues to procure significant quantities of wheat from MP it will lower its purchases from Punjab.

The recent ordinance to facilitate out-of-mandi sales is being viewed as another attempt to lower mandi purchases from Punjab and Haryana and shift the business more towards out-of-mandi operations.

Where Punjab scores over MP

One big area where Punjab scores over MP is its per-hectare wheat productivity.

In the 2020-21 season, wheat was planted in about 8 million hectares in Madhya Pradesh, which was almost 65 per cent more than the normal area under wheat in the state while in Punjab, the crop was grown in around 3.5 million hectares, its usual average.

The production in Madhya Pradesh was around 30 million tonnes from 8 million hectares. That is a per-hectare productivity of about 3 tonnes, while in Punjab, production of around 19 million tonnes from 3.5 million tonnes translates into a per-hectare yield of 5-6 tonnes.

The per-hectare use of inputs in Punjab is also far more than in MP.

Clearly, Punjab is far ahead of MP on per-hectare yield. That is something Madhya Pradesh needs to replicate sustainably if it wants to be counted among the country’s foremost wheat growing states. 

Wheat procurement in Madhya Pradesh and Punjab (in million tonnes)
Rabi marketing season	Madhya Pradesh	Punjab	Total (All India)
2010-11	3.5	10.2	22.51
2011-12	3.46	10.95	28.33
2012-13	8.49	12.83	38.14
2013-14	6.35	10.89	25.09
2014-15	7.09	11.64	28.02
2015-16	7.3	10.34	28.08
2016-17	3.99	10.64	22.96
2017-18	6.72	11.7	30.82
2018-19	7.31	12.69	35.79
2019-20	6.72	12.91	34.13
2020-21	12.90*	12.71	38*
*Till June 15 Note: Total might not match as all states haven't been included; Source: FCI and state officials

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