To check inflation and encourage farmers to shift from mono-cropping, the Centre has asked state governments not to announce bonus over and above the minimum support price (MSP) on rice and wheat this year.
It also warned that state-run Food Corporation of India (FCI) will restrict procurement of foodgrains from such states and will not give subsidy to states on procurement and distribution of surplus foodgrains.
The directive issued by the Union Food Ministry will be effective from the 2014-15 rice procurement season starting October and 2015-16 wheat procurement season beginning April.
According to the directive, "If decentralised procuring (DCP) states announce bonus over and above MSP of rice and wheat for this year, the Centre will give subsidy only on foodgrains procured as required for PDS and welfare schemes."
The FCI would not have to procure additional requirements in these states and it would be the responsibility of these states to bear the financial burden on surplus stock, it said.
A DCP state procures and distributes foodgrains itself and foodgrain subsidy is released by the Centre on a quarterly basis after distribution of grains by the state government.
DCP is carried out in Chhattisgarh, Madhya Pradesh, Bihar, Gujarat, Kerala, Odisha, Tamil Nadu, West Bengal and parts of Andhra Pradesh and Rajasthan.
The directive also said that if non-DCP states announced a bonus on the MSP, then the FCI will not carry out procurement operations in such states.
In such cases, the state governments would have to take care of procurement and distribution of grains to meet requirement for PDS and other welfare schemes. It has to arrange its resources to store the grain, it said.
"FCI, in consultation with the Union Food and public Distribution Department, will decide how much wheat or rice stocks it should procure in a particular season, and restrict its central pool procurement to that extent, leaving the rest of the surplus stock to be disposed of by the state government, at its own risk and cost," the directive said.
The move is aimed at reducing the food subsidy bill which has risen to an annual Rs 1,00,000 crore in last few years following sharp rise in rice and wheat procurement.
The Union Food Ministry is of the view that when farmers can use new technologies and seeds to raise crop yields, there may be no need for state governments to announce bonus on the MPS to encourage farmers to grow rice and wheat.
It also said the continuous mono-cropping is affecting soil health. Farmers are growing those crops on which states fix bonus, ignoring other high-end crops.
There is a need to curb the practice of fixing bonus on the MSP as it distorts the commodity markets causing inflationary trend. It also drives away private traders, putting procurement and storage pressure on FCI, it added.
States such as Madhya Pradesh, Rajasthan, Chattigarh, Bihar had annouced bonus on rice and wheat last year.
