How lack of MSP driving traders to smuggle paddy into Punjab, Haryana.

Trucks carrying paddy illegally into Punjab apprehended at the borders. 

Pic courtesy: thehansindia.com 

The vigil is not for nabbing infiltrators coming from across the international borders. This time the surveillance is along the Punjab borders with its neighbouring states for a different reason. Nearly 150 teams involving 1,500 officials of the civil supplies department are keeping a close watch at the borders ensuring that trucks carrying paddy from other States do not enter Punjab. 

This is not the first year that such tight scrutiny is being maintained at the borders. For the past few years, both Punjab and Haryana have maintained strict vigil at its borders to ensure that no trucks, tractor-trollies and bullock carts laden with paddy (and also wheat during the wheat procurement season) are allowed entry. Haryana also ensures that unscrupulous traders do not bring bajra from neighbouring Rajasthan. 

Deceitful traders from as far as West Bengal, Bihar and Uttar Pradesh have found it profitable to purchase paddy from farmers at prices as low as Rs 900 to Rs 1,100 per quintal, and transport it all the way to Punjab and Haryana where it is sold at the Minimum Support Price (MSP) of Rs 1,960 per quintal in the mandis. Despite the risk, and the additional transportation cost, traders still find it economical to sell it at MSP at such a far distance. In lot many cases, even when unscrupulous traders manage to sneak in, Punjab and Haryana have raided the premises where these stocks are offloaded, seized the trucks, and filed FIRs against the traders. 

A few days after procurement operations began this year, Punjab seized huge stocks of paddy that had been brought from Bihar. As per media reports, while about 4,000 quintals of paddy were recovered from a godown in Taran Taran in Amritsar district, and another 12,000 bags of paddy were seized in Kapurthala. A few days back, trucks carrying 400 quintals of paddy coming in illegally from West Bengal were apprehended. In another incident, 350 quintal of paddy from Uttar Pradesh was seized in Patiala district. 

Last year, in just one incident, Punjab had confiscated over 11,000 quintals of paddy at the Punjab-Haryana border in Patiala. This consignment was coming in from Bihar and UP. Similarly, media reported of numerous other such seizures. In April this year, soon after the wheat procurement season had begun, trucks carrying 25,000 bags of wheat, containing 50 kg each, were impounded in Bathinda district. For years, more so since 2017, wheat and paddy has been illegally transported to Punjab and Haryana. 

In an interesting analysis, Indian Express has worked out that huge quantities of paddy is transported from other States, mainly from Bihar and UP, and is marketed in Punjab, adding to the higher figures of paddy procurement from the food bowl. Comparing production and procurement statistics, and looking at the yields recorded in crop-cutting experiments and the possible marketable surplus it can generate, the newspaper has estimated that for three consecutive years, beginning 2017-18, Punjab has procured more than 10-lakh tonnes of additional quantity of paddy every year. Accordingly, it procured an additional 15.42-lakh tonnes in 2017-18; an extra 10.20-lakh tonnes in 2018-19 and another 11.82-lakh tonnes in 2019-20.  

These staggering figures of huge quantities of paddy being from Bihar, West Bengal and UP to Punjab clearly show how defective the marketing system is. It clearly reflects on the failure of the State governments to provide adequate marketing infrastructure as well as for the Centre to provide farmers with remunerative prices across the country, and not keep it confined to some pockets alone. Otherwise there is no reason why traders would be willing to take the risk of illegally transporting paddy (and wheat) to Punjab and Haryana where they can get a higher price. At the same time, it also brings out clearly the primary reason why eastern UP, Bihar and West Bengal, which have roughly 70 to 80 per cent of the rural population engaged in agriculture, remains steeped in poverty. 

But instead of addressing the fundamental flaws in marketing and procurement operations, the Centre appears keener on finding ways to reduce paddy procurement from Punjab. It reminds me of a film I had seen when I was a child. “Don’t raise the bridge, lower the river” was its tile. And this is exactly the probable solution the government seems to be working towards, and believes will put an end to paddy smuggling. It has decided to cap per unit paddy procurement at 34 quintals per hectare. At the same time, it is also discussing the possibility of restricting paddy procurement at 170-lakh tonnes, with Punjab government insisting on 190-lakh tonnes. 

The problem is not of paddy smuggling. The bigger problem that the policy maker refuse to see is the denial of the rightful price, by way of an assured MSP, to farmers in eastern UP, Bihar and West Bengal and for that matter across the country. For instance in Bihar, less than 2 per cent of wheat and 20 per cent of paddy is procured from farmers at the MSP announced. The remaining quantity is sold by farmers at a distress price ranging from Rs 900 to Rs 1,200 per quintal at the maximum. Compare it with Punjab, where more than 95 per cent of paddy is procured by the State agencies on behalf of the FCI for which the RBI has extended a cash credit limit of Rs 35,700-crore. 

Punjab has strengthened its network of 3,000 mandis and purchase centres to procure the paddy marketable surplus this year. Even though there are lingering questions whether MSP provides farmers with profitable price, the fact remains that in Punjab and Haryana farmers at least get an assured price. It is because farmers in other States don’t get an assured price, and also do not have an assured marketing network that they have to sell the produce at a distress price. Therefore, instead of making all-out efforts to stop smuggling of paddy into Punjab, the effort should be to replicate Punjab’s time-tested agricultural marketing infrastructure and its effective price delivery mechanism in other States. The higher the price, the higher will be the average farm household income. Therein also lies the way to lift millions out of poverty. #

Source: How lack of MSP driving traders to smuggle paddy into Punjab, Haryana. Bizz Buzz. Oct 15, 2021. https://www.thehansindia.com/business/how-lack-of-msp-driving-traders-to-smuggle-paddy-into-punjab-haryana-711148

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Dismantling food procurement will have serious repercussions.

Photo courtesy: IndiaToday

At a time when agrarian distress is quite pronounced, and while India ranks 102 among 117 countries in the Global Hunger Index 2019, the country’s granaries are overflowing. Against a surplus of 73.1 million tonnes of wheat and rice which was stacked with the government in July 2019, the food stocks are projected to swell by another 10 million tonnes or so to reach a record 84.7 million tonnes in July 2020.

Expecting to be saddled with an extra 46.3 million tonnes by July 2020, over and above what is prescribed under buffer norms, the Centre is asking Punjab, Haryana and other surplus States to curtail procurement.

While the Prime Minister’s Office wants to reduce the subsidy burden, and ostensibly reduce the cost of carryover stocks, the Commission for Costs and Prices (CACP) is seeking a review of the open-ended procurement policy under which whatever marketable surpluses of wheat and rice farmers bring to the mandis the government is committed to buy at the MSP. Seeking a restriction on procurement by setting limits for purchase, the CACP is also suggesting that the private sector be allowed to directly procure from farmers.

The last time the government amended the APMC (Agricultural Produce Market Committee) Act in 2006 to allow private companies to buy directly from farmers, it ended up turning the country into world’s biggest importer of wheat. The private trade swung into action to make brisk purchases, but didn’t disclose the quantity purchased and horded the grain. As a result, there was a shortfall in procurement at a time when there was no visible drop in production. To meet the food needs for public distribution, India had to import 5.5 million tonnes of wheat in 2007-08 at almost double the price it paid to domestic farmers. International prices had jacked up when India’s wheat import needs became known. This had evoked a lot of controversy, and the BJP (which was then in the Opposition) had demanded a CBI enquiry into what it called wheat import scandal.

Allowing private trade to buy wheat or paddy directly from farmers, bypassing the APMC regulated markets, therefore is fraught with dangers. At no stage can the government afford to ignore the ‘food security’ requirements and has to be ready with adequate buffer stocks, even if it is more than what is required, to meet any unforeseen shortages.

To the question of what to do with excess inventory, isn’t the failure to liquidate stocks when there exists plenty of hunger simply a reflection of food mismanagement? In 2006, when the first Global Hunger Index report was published, India’s ranking was at a dismal 96 among 119 countries, sliding further to 102 ranking in 2019. Several other studies have shown that rural India (and also urban poor) was spending less and less on food. A leaked report of the consumer expenditure survey – which has been junked by the government – clearly shows how food consumption in rural areas had steadily dropped by 10 per cent in the period 2011-12 and 2017-18. The piled up stocks therefore could have been very effectively used to meet the nutritional needs of a large section of the population. Here I agree with the recommendations of the CACP which suggests additional allocations to be made under the National Food Security Act (NFSA), Antyodaya Anna Yojna and other welfare schemes.

On the issue of curtailing open-ended procurement, what needs to be understood is that even if the MSP does not entirely cover the cost of cultivation, at least it provides an assured price. For the farmers, an assured price as well as an assured procurement is what protects them for the tyranny of the markets. That is why farmers’ demand for raising MSP and linking it with the Swaminathan Commission’s recommendations has been growing steadfast. But for quite some time, the dominant economic thinking is for dismantling the APMC regulated markets and doing away with MSP. The World Bank has been consistently demanding this, the World Trade Organisation (WTO) has been questioning the need for public stockholding, and even the Economic Surveys, as well as some mainline economists, have repeatedly pointed to how administered prices are coming in the way of what it calls as price discovery.

Let’s be clear. If there is one market intervention that ensures price discovery it is the MSP, if it is delivered properly. In a country where only 6 per cent farmers get the benefit of MSP, markets have failed miserably to provide a better price to 94 per cent of the remaining farmers and thereby help in price discovery. The introduction of e-NAMs (electronic national agricultural markets) too has failed to assure a higher price to farmers. Although the former Finance Minister Arun Jaitley had acknowledged that e-NAMs are the first step towards setting up spot markets, what is not being answered is why in the US agriculture continues to slide into deep crisis year after year despite having the world’s largest commodity exchange at Chicago, and another at New York? According to US Department of Agriculture (USDA) the growth in real income for American farmers has been on the decline since 1960s.

Strengthening the procurement system is therefore the answer. Instead of ascribing a quota system (at the farmer or the district level) for limiting wheat and paddy procurement, an effective procurement system needs to be evolved for alternate crops. For instance, if Punjab’s share in total procurement of wheat has to be reduced from the existing 37.1 per cent, an equally robust procurement system for crops like maize, millets, pulses and oilseeds have to be first ensured. This also holds true for paddy, which is blamed for the depleting ground water. Farmers do realise the need to diversify, but in the absence of an assured price and procurement, are not willing to make the shift. Rightly so. After all, volatility of markets is what hits farmers the most.

Give farmers a viable alternative, they would do the rest. But on the other hand, any move to systematically dismantle the food procurement system, based on the twin strategies of assured price and an assured market, which Dr M S Swaminathan had once referred to as the two planks of a ‘famine avoidance’ strategy, will have serious political ramifications. #

Give farmers a viable crop alternative. The Tribune. Jan 2, 2020.

https://m.tribuneindia.com/news/give-farmers-a-viable-crop-alternative-20342

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To create private markets, Maharashtra deregulates APMC Act

A typical mandi scene -- Pic courtesy Hindu Business Line

It is not unusual for wheat and paddy grown in adjoining areas of Uttar Pradesh to find its way into Haryana mandis. But at the peak of the paddy procurement season this year, a lot of paddy procured in Bihar has been transported all the way to be sold in Punjab and Haryana. As per news reports, more than 2.5-lakh bags of paddy from Bihar have been seized in a month-long drive conducted by the Punjab and Civil Supplies department. In addition, another 2-lakh bag of previous year’s rice meant for PDS supplies in Bihar have also been seized.

In neighbouring Haryana, more than 1.25-lakh bags of rice meant for PDS supplies in Bihar have been seized from Karnal and its adjoining areas in raids conducted during September and October. In an interesting development, The Tribune(Oct 26) reported Karnal district alone having purchased more than double the anticipated production even though the paddy procurement season was half way through. This was essentially because of a well-oiled nexus that exists between traders in Bihar, Uttar Pradesh and Haryana whereby cheaper paddy/rice purchased from as far as Bihar is made available for procurement at a higher price in Haryana.

The reason is simple. While Uttar Pradesh lacks a well-knit system of a mandis network under the Agricultural Produce Market Committee (APMC) Act, Bihar had revoked the APMC Act way back in 2006. In the absence of APMC mandis, farmers in Bihar are constrained to sell wheat and paddy in open market at prices that are far below the Minimum Support Price (MSP). That is why traders find it profitable to transport paddy (and also wheat) from a pretty long distance and that too after having incurred an additional transportation cost. While paddy sells at anything between Rs 800 to 900 per quintal for low quality grade, and a maximum of Rs 1,300 to Rs 1,500 per quintal for good quality in Bihar, paddy MSP for normal quality in Punjab and Haryana is substantially higher at Rs 1,750 per quintal.

While Bihar was the first State to have repealed the APMC Act, Maharashtra has now become the second State after Bihar to have amended the APMC Act. A few months after it had brought in a notification making it obligatory for the trade not to purchase agricultural commodities below the MSP, in a complete turnaround it has now promulgated an Ordinance on Oct 25 deregulating all produce, including foodgrains, oilseeds and flowers, from the APMC Act. The new directive allows farmers to sell their produce outside the regulated APMC markets in the State. Earlier too, in June 2016, it had passed an amendment deregulating fruits and vegetables from the APMC Act but there are no studies telling us whether the move has helped farmers in any way. We have only seen reports of farmers dumping veggies on the streets in the absence of market prices even covering the cost of production.   

“The first step is to pass an Ordinance. The rules will be notified within 15 days,” Sadabhau Khot, the state minister for agriculture and market reforms told a media channel, adding “the idea is to create private markets with similar facilities as APMCs, while ensuring healthy competition.” While I am not sure how much the APMC amendments will help Maharashtra farmers in price discovery, it will certainly be interesting to watch how soon the trade opens marketing channels to make available Maharashtra paddy for procurement in Punjab and Haryana. When Bihar revoked the APMC Act some 12 years ago, the expectations were the same. The basic idea was that removing the monopolistic control of APMC markets will allow private investments, motivate the corporate sector to undertake direct marketing and provide for more efficient markets. Nothing like this happened. In fact, Bihar has turned into a test case to know how best agriculture can be turned exploitative.

“The amendments have been made in accordance with the Centre’s Modal Agricultural Produce and Livestock Market Act 2017,” the minister stated. In fact, this is where the problem lies. The inter-ministerial task force (in 2002) that initially recommended the APMC Act to be amended did not ascertain the social fallout of withdrawing an assured market for small farmers but was driven by the industry’s prescription. Contract farming, direct marketing and public-private partnership is only aimed at dismantling an excellent social framework which so assiduously helped build food security. Even the Food and Agriculture Organisation of the UN has questioned the need to repeal the assured markets saying that its social determinants first need to be evaluated. The main argument that APMC mandishave become stronghold of cartels is certainly correct, but that’s an issue of failure of governance. Instead, dismantling the mandiinfrastructure and replacing it with still bigger cartels of private players under the PPP mode is not the way forward, and will only lead to making the available infrastructure for corporate agriculture. In other words, we are fast moving towards privatisation of profits and socialisation of costs.   

Nevertheless, deregulation of APMC Act in Maharashtra comes at a time when a few weeks back the Centre had committed to procure 25 per cent of the agricultural commodities for which a higher MSP is being announced. Although the rules have still to be notified, and the finer print is awaited, but it is quite obvious that the amendments will reduce the delivery of MSP to farmers. This is exactly what the FICCI and CII had been demanding for long, wrongly saying that a higher MSP comes in the way of farmers realising a much higher price. Punjab and Haryana face tremendous pressure to dismantle the existing APMC infrastructure. In fact, the Commission for Agricultural Costs and Prices (CACP) too had come out with a study some years back ranking the State’s as per their market friendliness. Incidentally, Bihar topped the market-friendly index, and Punjab, with its widespread network of mandis, purchase centres and rural connectivity was placed at the bottom.

At a time when only 6 per cent farmers get the benefit of MSP prices, and when 94 per cent farmers are in any way dependent on markets, how does a breakdown of a parsley available public sector market infrastructure lead to increasing competitiveness? Moreover, it leaves behind a huge cost for country’s food security. It was in 2007-08 that the then Agriculture Minister Sharad Pawar had allowed private companies to bypass APMC mandis and buy wheat directly from farmers. With pvt companies cornering as much wheat as possible, it resulted in such a massive shortfall in public procurement that the country had to eventually resort for nearly 8 million tonnes of wheat imports in two years, at roughly double the MSP that was being paid to domestic farmers.#

Tender Mercies in Open Markets. The Tribune. Nov 14, 2018
https://www.tribuneindia.com/news/comment/tender-mercies-of-open-markets/682538.html

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Burning the Paddy Stubble

Not realising that much of the agrarian distress is because of the unnecessary burden of expensive farm machines, both the frontline agricultural states of Punjab and Haryana are working overtime to sell more machines to farmers. As the paddy harvesting time nears, and fearing air pollution clogging New Delhi, both the governments are working overtime to sell more machines in the name of providing a solution for stubble burning.

As paddy harvest is getting at its peak, Punjab has a target to supply 27, 972 farm machines, including Happy Seeder, paddy straw chopper, cutter, mulcher, reversible mould board plough, shrub cutter, zero till drill in addition to making it compulsory for combine harvester machines to come attached with a super straw management equipment that will cut and spread the biomass in the field. Most of the other machines will require a rotavator and a rotary slasher. In Haryana, a set of 40,000 such similar machines have already been delivered to 900 custom hiring centres and thousands of individual farmers have made direct purchases. For farmers, the Happy Seeder machine is available at 50 per cent subsidy, and for the cooperatives or a group of farmers it is available for 80 per cent subsidy.

It is a bonanza for farm equipment manufacturers. They had lobbied hard all these years to sell the machines, and stubble burning came in as a god-sent opportunity to dump the machinery into crop fields. In Punjab, where 4.5-lakh tractors already exist against the requirement of 1-lakh tractors, I fail to understand why farmers are being burdened with another set of six to eight machines. Much of the indebtedness in Punjab is related to the overloading the farmers with tractors, which being uneconomical in operations are only adding to farmer’s debt. Paddy stubble burning is a problem that lasts for a maximum of three weeks, and these machines will remain idle for the rest of the year.

The allocation of subsidy for the purchase of machinery shows how myopic government policies are when it comes to farming. I wonder whether the underlying aim in reality is to help the farm manufacturing units in the name of farmers. Earlier too, a massive subsidy, as much as Rs 25-lakh and above depending on the size, was made available to set up poly houses. Several studies have now shown that more than 80 per cent of these poly houses are lying defunct. This is nothing short of a major scandal.

But nevertheless, what Punjab, Haryana, western Uttar Pradesh required was the Punjab Chief Minister Amarinder Singh had earlier suggested.  He had sought an investment of Rs 2,000-crore from the Centre to ensure that farmers remove paddy straw without burning it. “We have demanded that the Centre should give Rs 100 per quintal, which comes to roughly Rs 2,000-crore.” And he was right. But then he was told the government didn’t have the money. Strangely, why couldn’t a small fraction of the Rs 6.9-lakh crore proposed economic stimulus package for building highways be used for addressing the problem of stubble burning? Further, only a few months back, the government enhanced the DA instalment for government employees by 1 per cent. This jump entails an additional expenditure of Rs 3,000-crore. But when it comes to agriculture, the government always raises the red flag.

Farmers are aware of the environmental fall-out. But they need monetary help. Punjab farmers have been demanding Rs 6,000 per acre as a compensation package for the additional costs they have to incur to take measures that prevents burning of crop residues. This is a one-time investment every year, and I see no reason why the governments cannot provide a direct monetary incentive to farmers. Moreover, there are 12.5 lakh MNREGA card holders in Punjab. The State has not been able to use over Rs 4,000-crore of the funds available under MNREGA. By seeking approval for including paddy straw management under MNREGA activities, Punjab could have not only created jobs for the idle labour force but also mitigated the environmental fallout from crop residue burning. #

खेती पर मशीनों का बोझ डालना पराली जलाने की समस्या का हल नहीं- देविंदर शर्मा 

https://www.bhaskar.com/opinion/current-issue/news/devindar-sharma-view-on-agriculture-0790421.html

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