FCI faces stiff competition from private players for wheat procurement

The government owned Food Corporation of India (FCI) faces stiff competition from private players, including local stockists and multinational companies (MNCs) for wheat procurement due to the grain price quoting at above the minimum support price (MSP) this season in Madhya Pradesh.
 

While the FCI is laying emphasis primarily on urban areas and large mandis in the vicinity, private players move door-to-door for collection of wheat directly from farmers by offering price higher than the MSP. Following this, FCI has also started setting up camps near major harvesting centres to ease farmers' transportation and selling fears.

"So, there is a neck-and-neck competition between the FCI and private players in Madhya Pradesh where procurement has already started about a week ago. We believe, only half of quantity offered by farmers has come to the FCI while the other half goes to private players," said a senior FCI official involved in wheat procurement in Madhya Pradesh.

Trade sources believe that the government has mandated FCI to procure 8.5 million tonnes of wheat in Madhya Pradesh at MSP. Since wheat procurement started over a week ago, FCI has procured around 500,000 tonnes. But, the government owned agency has shown aggression this season by reaching out to farmers.

According to the FCI, the agency had procured 3.99 million tonnes of wheat from Madhya Pradesh, 17.35 per cent of the total 22.96 million tonnes procured from across the country for the Rabi Marketing Season (RMS) 2016-17. For the RMS 2017-18, however, the government increased its wheat procurement target for FCI from Madhya Pradesh to 8.5 million tonnes, which the official believes would be unachievable due to higher prices offered by private players.

"Like private players, FCI has also started setting up purchase centre near major production belt. So, farmers supply wheat to us despite we offer Rs 75 - 100 a quintal lesser than private players as farmers feel assured of their timely payment. Apart from that, farmers do not want to take transportation risk in terms of wheat supply to mandis. They are not sure of selling price in mandis as price keep fluctuating depending upon demand and supply. In case, wheat is not sold promptly in the market then they would have to pay demurrage. Finally, they fear incurring losses. By selling to us, farmers are sure of getting MSP," said the official.

Data compiled by the agmerknet.gov.in showed model wheat price of Lokwan variety in Indore mandi was quoted at Rs 1650 a quinta, Rs 25 higher than the MSP fixed by the government for 2017 procurement season. But, the best quality wheat was sold at Rs 1990 a quintal on Friday, Rs 365 a quintal above the MSP of Rs 1625 a quintal of fair average quality. Total wheat arrivals in Indore mandi was reported at 1382.7 tonnes on Friday. Wheat in Thandla mandi in Madhya Pradesh was selling at Rs 1,710 a quintal (model) on Friday.

Meanwhile, FCI is concentrating on Uttar Pradesh for intensifying wheat procurement with the state government allowing purchase for this season late last week. Interestingly, neither in Madhya Pradesh nor in Uttar Pradesh, the FCI has achieved wheat procurement target so far.

This year, too, FCI aims to achieve 8 million tonnes of 8.5 million tonnes target set for Madhya Pradesh and 2 million tonnes of 3 million tonnes target fixed for Uttar Pradesh. Assuming that FCI remains short of its target in Madhya Pradesh and Uttar Pradesh, the target of 33 million tonnes set for the entire country looks unachievable.