The farmers are apprehensive that the government may abdicate its responsibility of buying grains at the minimum support price (MSP). This apprehension stems from the fact that the Shanta Kumar Committee recommended in 2015 that the Food Corporation of India hand over procurement operations to states, knowing fully well that the states did not have the funds to procure the grains.(HT file photo)
The farmers are apprehensive that the government may abdicate its responsibility of buying grains at the minimum support price (MSP). This apprehension stems from the fact that the Shanta Kumar Committee recommended in 2015 that the Food Corporation of India hand over procurement operations to states, knowing fully well that the states did not have the funds to procure the grains.(HT file photo)

Managing flood of foodgrains is the nation’s problem today

GUEST COLUMN Every mandi yard must have silos, automatic cleaning and weighing machine (that issues electronic receipt) and an elevator to store the grain in the silo. state procurement agencies and even private players can be roped in.
Hindustan Times, Chandigarh | By DS Bains
PUBLISHED ON NOV 03, 2020 10:02 AM IST

The nation is sitting on a mountain of foodgrains. Huge sums have been spent on procurement and the carrying cost is humongous, too. Punjabi farmers were applauded when food scarcity in the country was banished under then Prime Minister Lal Bahadur Shastri’s slogan- Jai Jawan, Jai Kisan. Not famine, but a flood of foodgrains, is the nation’s problem today.

The farmers are apprehensive that the government may abdicate its responsibility of buying grains at the minimum support price (MSP). This apprehension stems from the fact that the Shanta Kumar Committee recommended in 2015 that the Food Corporation of India hand over the food procurement operations to the states, knowing fully well that the states did not have the funds to procure the grains.

It is suggested that stocks be pared down to the buffer stock norms in three ways: (a) releases under the open market sale scheme at a discount if needed; (b) exports – the Atal Bihari Vajpayee government had exported almost 8 million tonnes of foodgrains (out of which Punjab Markfed, where I was managing director then, had a share of 2.6 million tonnes), and (c) giving it away as food aid to conflict-ravaged countries such as Yemen, Burkina Faso, South Sudan, Nigeria and Congo (to earn international goodwill).

PROMOTE CULTIVATION OF FRUIT, VEGGIES

Sale and export can generate Rs 150,000 crore, besides saving of around Rs 20,000 crore on the annual carrying cost. The funds so raised should be used as “seed money” for setting up a price stabilisation fund, for other commodities, which carry an MSP. Prices of pulses, maize, oilseeds and cotton should be assured as per the MSP. Many farmers may then shift away from foodgrains and the recurring problem of overflowing buffer stocks will be solved. Second, we need to promote the cultivation of fruits and vegetables by promoting the establishment of cold chains linked to supermarkets, which should be allowed to sell them.

Third, our current imports of onions from Afghanistan shows that Punjab can be the hub for the sale of milk, eggs, chicken, buffalo meat, fruits and vegetables to the Middle Eastern Arab nations through Pakistan and Afghanistan by creating a land route through diplomacy. This will generate a business lobby in our neighbourhood, which can be a counterweight to the hawks in the region.

ADOPT US MODEL OF HANDLING AGRI PRODUCE

The price stabilisation fund should be used for oilseeds, pulse, maize and cotton, besides wheat and paddy and cash crops such as basmati and Durum wheat. These crops need not be procured physically. We can emulate the policy of the United States for handling agri produce - namely the non-recourse loan scheme.

In the US, the federal government announces support prices but the farmers are encouraged to store their foodgrains in silos at harvest. They are provided non-recourse loans by the commodity credit corporation. The amount of loan is equal to the quantity stored and multiplied by the support price.

The farmer is given three years to liquidate the stock. If the market price is higher than the support price, the farmer sells the grain and repays the loan with a nominal interest, keeping the profit. To prevent speculation, the loan can be recalled if the prices hit a trigger – 175% for grains and 140 % for corn. If the prices do not touch the support price, the farmer can default on the loan and surrender the grain. There is no other penalty. That is why it is called a non-recourse loan. The policy has worked well since 1933, when it was initiated for cotton and corn.

The policy can be implemented in India by using the electronic negotiable warehousing receipt system, which late Ram Vilas Paswan had inaugurated in 2017. All farmers (including small and marginal ones) can store their crops at harvest and get a tradable receipt. On storage Nabard/ RBI should provide the farmer a loan.

MAKE PROCUREMENT PROCESS MECHANISED

To make the scheme transparent, the procurement operation must be mechanised. Every mandi yard should have silos, automatic cleaning and weighing machine (which issues an electronic receipt) and an elevator to store the grain in the silo. The scheme can include state procurement agencies and even private players. Across the country, 980 warehouses have been registered with the Warehousing Development and Regulatory Authority, while there are 64,000 warehouses storing 20,000 tonnes of commodities. Four registered warehouses operate in Punjab. In a regulated warehousing system, the regulatory authority could be government, as is the case in the US and Tanzania, or private as in South Africa.

Implementing the system would be a painstaking and slow task and an overlapping five-year term should be given for it. During this period, the MSP regime must continue and the same should be written into law.

If the farmers manage to secure an MSP on all 23 crops for which it is announced by the Centre and if the farmers or groups of farmers can use the electronically generated warehouse receipt to catch the off season high prices, the goal of doubling farm incomes by 2022 would be achieved.

The only issue that remains to be addressed is the loss of mandi fee and rural development cess. The Union government should compensate the state for five years or so, after which the taxes on food processing and buoyant agriculture subsidiary activities would help balance the budgets. dhanbirbains@gmail.com

The author, a retired Punjab-cadre IAS officer, earned a Master’s degree from Harvard University, specialising in agri-business

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