Farmers gaining from paddy buy up 80% in 6 years, but Punjab needs more

As Punjab goes to the polls on February 20, how the rural parts of the state vote will be watched because the election comes against the backdrop of one of the biggest farmers’ agitations (against the three farm laws).

Annual procurement of rice and wheat is a big farming issue in Punjab, which was voiced during the year-long agitation.

Earlier this month Union Finance Minister Nirmala Sitharaman, while delivering her Budget speech for FY23, had said the procurement of wheat and paddy in India in the 2021-22 rabi and kharif marketing seasons was expected to total around 121 million tonnes, benefiting around 16.3 million farmers.

She also said minimum support prices of around Rs 2.37 trillion would be transferred to the bank accounts of farmers.

An analysis of the data on the website of the Food Corporation of India (FCI), the Centre’s nodal agency responsible for procuring wheat and rice, shows between 2015-16 and 2020-21, the number of farmers benefiting from paddy procurement has risen by almost 80 per cent while those gaining from wheat procurement has grown even higher by almost 140.37 per cent.

Not only this, a report by the Commission for Agriculture Costs and Prices (CACP), the government’s main farm price-setting panel, shows in the rabi season of 2019-20 around 436,858 oilseeds farmers benefited from procurement operations, which went up to over 1.11 million farmers in the rabi season of 2020-21.

Changing contours of procurement

Beyond what Sitharaman said about the procurement process in 2021-22, there are several dimensions to this.

The FCI data shows that among major paddy-producing states between 2015-16 and 2020-21, the number of farmers benefiting from government procurement grew exponentially in Andhra Pradesh, Telangana, Chhattisgarh, Jharkhand, Odisha, Uttar Pradesh, and even West Bengal. But it has broadly remained at 10-12 million farmers in Punjab for paddy.

Similarly, in the case of wheat too, the data from FCI shows that since 2015-16, the number of farmers benefiting from state procurement has grown exponentially in Madhya Pradesh, Uttar Pradesh, and Rajasthan but in Punjab, it rose by just 5.3 per cent during this period (see chart attached).

Some experts say the transformation in procurement is part of an attempt to broad-base wheat and rice procurement in the country and it should not be limited to a few pockets and regions.

Need to diversify

The Budget and multiple reports and recommendations before that have called for diversifying from wheat and rice production in states like Punjab to more high-value and lucrative crops either by incentivising farmers adequately or by disincentivising open-ended procurement.

The Budget has talked about starting a programme for promoting domestic oilseeds production, for which Rs 600 crore was allocated in FY23 under the broader umbrella programme of the Rashtriya Krishi Vikas Yojana (RKVY).

The programme aims to increase the production and productivity of oilseeds in the next five years starting from 2020-21 till 2025-26 from 36.10 million tonnes to 54.10 million tonnes.

All the parties in the fray in the current elections have promised minimum support prices for crops other than wheat and rice and have assured procurement for oilseeds, pulses, and corn to promote diversification.

Pitfall of open-ended procurement

With the Centre sitting on huge stocks of wheat and rice, which is far more than what is required annually for distribution under through the public distribution system (PDS), the CACP has repeatedly recommended reviewing the open-ended procurement policy to bring down the financial and logistical burden on the government.

Rough estimates show due to the open-ended procurement policy, by which the government buys wheat and rice from farmers in mandis, India annually ends up purchasing around 80 million tonnes of wheat and rice, while its requirement is around 55 million tonnes.

It said this led to mounting food stocks and adversely affected crop diversification.

“These excess stocks create storage problems and also high storage and financing costs, leading to high food subsidy burden and therefore the Commission recommends that open-ended procurement policy should be reviewed,” the report said.

The excess stock is due to a big mismatch between foodgrains required to run the Public Distribution System and the quantity of grain procured, officials said. Data shows that annually 78-80 million tonnes of wheat and rice is procured for the central pool, against a requirement of 50-54 million tonnes for PDS, leaving the rest in excess.