Plan drew strong opposition from cartel of middlemen and agents as they will lose commission.
The food ministry’s ambitious plan to transfer the minimum support price (MSP) directly into the farmers’ accounts or through account-payee cheques has run into roadblocks in the first year itself.
Many states have not yet adopted a system to directly transfer money to farmers for grains procured on behalf of Food Corporation of India (FCI), making the plan purposeless.
The plan drew strong opposition from the cartel of middlemen and commission agents. Such transfers are slated to be mandatory from April 1, 2012. Commission agents purchase grains from farmers at low rates and sell the produce to Food Corporation at minimum support price — the price at which the government buys agricultural produce from farmers. If payments are made directly to farmers, the middlemen will lose their commission. The minimum price at which the government buys the agricultural produce (wheat, Rice etc) from the farmers is called MSP.
The direct transfer is made either through Real-Time Gross Settlement (RTGS) system in banks or through account-payee cheques. In the big grain producing states of Punjab, Haryana, and Rajasthan and to some extent in West Bengal, the state governments did not pursue the food ministry’s plan after showing initial interests.
Officials said the real test for direct MSP transfer will start when government starts its annual wheat procurement from April 1. The central government had in a meeting with state food secretaries and senior officials of FCI directed the corporation and the state governments to start the process of direct transfer of support price to the farmers and to the commission agents. Even then, the agents were opposed to the idea because they believe their commission would be reduced under the new arrangement.
In Punjab, one of India’s biggest contributors of grains to the central pool, the government will face the biggest challenge in starting the process of direct payment, as the state has a well-established system of commission agents and middlemen. The corporation had to discontinue the process of direct payment during the ongoing kharif procurement season midway because of dispute between FCI and commission agents.
Before the scheme came to a halt, funds were being transferred directly in five-six of the 11 revenue districts of Punjab. Six banks had been asked to open accounts for farmers. Officials said Rs 22.80 crore was transferred directly to the bank accounts of 1,938 farmers till October 11.
In Haryana, the corporation transferred the MSP directly to the farmers, but its own procurement is just miniscule when compared with the total quantity of paddy procured from the state. In West Bengal, which is India’s largest rice producing state, the problem was slightly different as most of the growers do not have proper bank accounts because of which money could not be transferred either through the RTGS facility or via cheques.
In other states, the system had worked but not in cases where bulk of the procurement is done by the state governments on behalf of FCI. Till January 5, the central government procured 16.8 million tonnes of rice for the central pool, of which almost 9 million tonnes was done by the state governments on behalf of FCI.
Last year, during the same period total procurement in the central pool was around 14.50 million tonnes. “We are trying to work out a solution and compromise with the commission agents and middlemen so that the process is started and no one gets hurt by it,” a senior FCI official said.
