Private stockists' scheme under PM-ASHAA for oilseeds a non-starter

Remaining expenses of handling, storage, distribution and sale losses have to be borne by the private participant

The Centre’s ambitious plan to engage the private sector in the procurement of oilseed through the Private Procurement and Stockiest Scheme (PPSS) under the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-ASHAA) programme has been a non-starter with no state willing to start any pilot or model to test the programme.

The private sector is also not keen on participating in the procurement, as it is not commercially viable. This is because the guidelines state that companies would be compensated at a maximum rate of 15 per cent of the notified minimum support price (MSP) of oilseeds. It would entirely be the private players’ responsibility to handle the procured commodity, including storage as well as transportation and also ensure its disposal. 

They will have to bear losses on that account. The scheme’s guidelines state that disposal will have to be done at a time when no other procurement scheme is being run so that there is no round-tripping of the commodity.

Eight pilots were to be conducted for PPSS to cover oilseeds, for which the MSP was declared by the government.

All the pilots had to be approved by the ministry of agriculture, but so far, no state has come up with any proposal. 

With procurement getting virtually over in the next few weeks, there is little chance of any substantial progress in this direction. According to the scheme’s guidelines, private entities that procured oilseeds will be given relaxation from stock holding limits applicable during that time and also the mandi fees for them need to be waived by the states.

At the current market rate, most kharif oilseeds are around 6-13 per cent less than the MSP of Rs 3,399 per quintal for soybean at most places and 20-40 per cent less than the MSP for groundnut of Rs 4,890 a quintal. 

Commercial viability seems to be a big hurdle.

“To me, the biggest challenge in involving private players in oilseeds procurement is whether it would be commercially viable and if the offer isn’t viable, I doubt if private companies would be interested,” said Sanjay Kaul, managing director of National Collateral Management Services (NCML).

Kaul said when the difference between the market price and the state-mandated MSP is more than 20 per cent in case of oilseeds, why would anybody be interested in the scheme if the participants aren’t compensated adequately for bearing the loss. “Also, I feel states themselves are not interested in running the pilots as they fear being labelled as favouring the private sector in procurement,” Kaul said.

NCML, which is one of biggest private players engaged in procurement of paddy on behalf of the Food Corporation of India  (FCI), said it sets up procurement centres for paddy, purchases paddy from farmers at MSP, stores the produce, mills it and thereafter sell it back to the corporation for which it is compensated. In Jharkhand, NCML has been engaged in procurement of paddy on behalf of the FCI as an effort to boost procurement from Eastern India. “The problem in this case (with FCI) is that funds are locked up for more than six months sometimes,” he said.

Hanish Sinha, assistant vice-president of National Bulk Handling Corporation (NBHC) said that with so high MSP and low market price, unless the difference is paid to the trader, no one will participate in the PPSS for oilseeds.

“There have been some talk of pilots in a few districts in MP, but nothing has moved,” Sinha said, adding that in the present form, the scheme isn’t working.