Limited Procurement of Foodgrains

Procurement of agricultural commodities is the purchase of food grains by the central or state governments.

• The Food Corporation of India is responsible for the purchase, storage, movement, distribution and sale of agricultural produce.
• Minimum Support Prices are the prices at which the government purchases food grains from farmers.
• The largest procurement at MSPs is for rice and wheat. About a third of the wheat and rice produced in the country is procured by the central government. In 2015-16, 33% of the wheat and 30% of the rice produced in the country was procured by the central government.

MSP

• MSPs are fixed by the central government in order to ensure remunerative prices to farmers. Factors taken into consideration in determining MSPs include costs of cultivation and production, productivity of crops, and market prices.
• High MSPs of crops provide incentives to farmers to adopt modern technologies and farming practices, to increase the overall productivity of their crops.
• The government announces MSPs for 22 crops (and a fair and remunerative price for sugarcane), but the Public Distribution System, for which grains are procured, primarily distributes wheat and rice to its beneficiaries.
• Since procurement is mainly carried out for wheat and rice, farmers have focused on the cultivation of these crops over other crops such as pulses and oilseeds.

Effectiveness of MSPs

• Although MSPs are declared for various crops, procurement at these prices mainly happens for wheat, rice, sugarcane and cotton, in a few states.
• As a result, in procuring states, farmers focus on cultivating these crops over other crops such as pulses, oilseeds, and coarse grains.
• MSPs are declared prior to each sowing season (in June and October) so that farmers are aware of the minimum price the government will offer for their produce. This is meant to encourage them to increase their investment in the production of crops.
• In a report to measure the efficacy of MSPs, the NITI Aayog found that a low proportion of farmers (10%) was aware of MSPs before the sowing season. 62% of the farmers were informed of MSPs after sowing their crops.

MSP has distorted cropping patterns, with excessive focus on the cultivation of wheat, rice and sugarcane in the procurement states at the expense of other crops such as pulses, oil seed and coarse grains. It has also resulted in depletion of water resources, soil degradation and deterioration in water quality in some states, especially in the north-western region. At the same time, it has discriminated against eastern states where procurement at the MSP is minimal or non-existent.