Today food grains are provided to beneficiaries under numerous schemes, like PDS, AAY, APY, Mid Day Meal for students, NFFWP etc. The work of Food grain distribution to the beneficiaries is the last stage of the entire supply chain. It would be worthwhile to understand the whole process as it actually takes place i.e. beginning with procurement. As an example, I would discuss the procurement process for rice. This is meant to understand the entire supply chain along with the various stake holders involved at different stages. The supply chain begins with the procurement of paddy, its transport to the rice mills, its processing at the mill to extract rice from the husk and packaging and transporting to various parts of the country and the local stocking and distribution thereof for various schemes.
As with the other crops the freshly harvested paddy is stacked in the fields to begin with. The paddy has some moisture content present in it. The farmers are free to sell their product in the open market or to the Government which purchases it at the Minimum support price (MSP). The government procures its rice targets through the various cooperative societies and the state food and supply departments.
Normally the paddy sale occurs in the daily or weekly ‘haats’. Some learnings in the procurement are listed below:
o The cooperative societies were lax to begin the collection of the food grain. Lesser margins, political interests or understanding with the private traders could be the reasons behind this. Some cooperatives complained of initial cash disbursement from their own sources, in case if the allocation receipt from the state gets delayed to begin with. The competitors for procurement i.e. the traders make spot payments in cash and hence have a point in their favour unless the cooperatives carry sufficient cash allotment with them. This results in delay in making the MSP operational and the traders purchase paddy at a lower price
o Traders form procurement cartels to keep the procurement price down. Reasons learnt for low procurement price in free market are high moisture content, high dirt and husk content, high procurement cost from middlemen (who at times buy grains from the fields and sell them in haats and earn their commission) and high transportation costs (for sending rice to mill for processing) , poor grain quality etc. These factors may explain up to 10 % variation from the MSP but the market price without the Government procurement remains between 60-70% of MSP
o Even this purchase price gets driven lower if paddy from the neighbouring states, where procurement price could be about 50% of MSP, enters local market. Sadly, the market on its own it hopelessly inefficient without Government intervention. The reason being absolutely no bargaining power of the farmers, the poorer ones and their families living on the edge. If Government procurement is totally stop, it could invariably drive the procurement price so low that within a few cropping seasons it might lead to driving people out of farming. At times even cooperatives pay 5-10 % less than MSP as the rice mills don’t pay them 100% price and make deductions on accounts listed above. MSP, even in its distorted form, at least makes the farming sustainable for the small and marginal farmers.
o Presently barring a few states, most states are not able to produce paddy to meet their internal demand of rice. However, in the surplus states, where the availability of paddy makes procurement and transportation cheaper, numbers of large multinational companies are targeting the produce. This is affecting the FCI procurement in these places. In contrast, in the interior regions with no bulk availability of crop for purchase (making procurement costlier) not many players are entering for buying the produce of the farmers. This is further increasing poverty and dependence on the local traders. Ultimately, the Government procurement is the only hope of farmers in such areas.
o The performance of procurement of food grains by the Government agencies is dependent on the drive of the individuals involved therein and that varies hugely. At places individuals involved have developed close relations with the traders and act as their agents delaying the implementation of the MSP or even avoiding the start of the Government procurement (and thereby assisting the traders in procuring the crop cheaper).
o The procurement season continues for a few months after each harvest. Initially the poorest farmers sell their produce, followed by the medium farmers. Some large farmers do have financial capability to hold the crop for some time and wait for the excess to reduce and let the purchase price rise. Most of the traders also procure and stack the paddy in their godowns and release it for processing gradually so as to allow the market price to rise. Ultimately, most of the crop lands with the businessmen, traders or millers, who have the large financial power and resources and political connections. A part of the crop also enters the public Distribution System run by the Government.
As with the other crops the freshly harvested paddy is stacked in the fields to begin with. The paddy has some moisture content present in it. The farmers are free to sell their product in the open market or to the Government which purchases it at the Minimum support price (MSP). The government procures its rice targets through the various cooperative societies and the state food and supply departments.
Normally the paddy sale occurs in the daily or weekly ‘haats’. Some learnings in the procurement are listed below:
o The cooperative societies were lax to begin the collection of the food grain. Lesser margins, political interests or understanding with the private traders could be the reasons behind this. Some cooperatives complained of initial cash disbursement from their own sources, in case if the allocation receipt from the state gets delayed to begin with. The competitors for procurement i.e. the traders make spot payments in cash and hence have a point in their favour unless the cooperatives carry sufficient cash allotment with them. This results in delay in making the MSP operational and the traders purchase paddy at a lower price
o Traders form procurement cartels to keep the procurement price down. Reasons learnt for low procurement price in free market are high moisture content, high dirt and husk content, high procurement cost from middlemen (who at times buy grains from the fields and sell them in haats and earn their commission) and high transportation costs (for sending rice to mill for processing) , poor grain quality etc. These factors may explain up to 10 % variation from the MSP but the market price without the Government procurement remains between 60-70% of MSP
o Even this purchase price gets driven lower if paddy from the neighbouring states, where procurement price could be about 50% of MSP, enters local market. Sadly, the market on its own it hopelessly inefficient without Government intervention. The reason being absolutely no bargaining power of the farmers, the poorer ones and their families living on the edge. If Government procurement is totally stop, it could invariably drive the procurement price so low that within a few cropping seasons it might lead to driving people out of farming. At times even cooperatives pay 5-10 % less than MSP as the rice mills don’t pay them 100% price and make deductions on accounts listed above. MSP, even in its distorted form, at least makes the farming sustainable for the small and marginal farmers.
o Presently barring a few states, most states are not able to produce paddy to meet their internal demand of rice. However, in the surplus states, where the availability of paddy makes procurement and transportation cheaper, numbers of large multinational companies are targeting the produce. This is affecting the FCI procurement in these places. In contrast, in the interior regions with no bulk availability of crop for purchase (making procurement costlier) not many players are entering for buying the produce of the farmers. This is further increasing poverty and dependence on the local traders. Ultimately, the Government procurement is the only hope of farmers in such areas.
o The performance of procurement of food grains by the Government agencies is dependent on the drive of the individuals involved therein and that varies hugely. At places individuals involved have developed close relations with the traders and act as their agents delaying the implementation of the MSP or even avoiding the start of the Government procurement (and thereby assisting the traders in procuring the crop cheaper).
o The procurement season continues for a few months after each harvest. Initially the poorest farmers sell their produce, followed by the medium farmers. Some large farmers do have financial capability to hold the crop for some time and wait for the excess to reduce and let the purchase price rise. Most of the traders also procure and stack the paddy in their godowns and release it for processing gradually so as to allow the market price to rise. Ultimately, most of the crop lands with the businessmen, traders or millers, who have the large financial power and resources and political connections. A part of the crop also enters the public Distribution System run by the Government.
In one of the procurement drives, when I had camped in a haat for the procurement of the food grains, I remember how I had to argue with the cooperative to open a procurement stall. The market price of paddy increased immediately by over a rupee per kg with the beginning of Government procurement, though the traders raised the price grudgingly. Some people still sold their paddy at a lower price to the traders instead of selling it to the cooperative as they explained that the cooperative had come due to official pressure and the next time the trader would harass the farmers in buying their produce. I remember one woman arriving with a bag full of paddy on her head while her 3-4 year old son was carrying some 2-3 kg of paddy on his head in a small bag. They had made unexpected gains that day and the mother had happily bought her son something to eat.
While I was astonished that such a small baby was carrying load on his head, my driver explained that the lady might have walked some 5-6 km with her son to sell her paddy. Her husband might be a day labour and the son was not only helping her in carrying paddy but was also protecting her (‘Maa-yer Rak-kha korche’ as he had said). That day I had something more to learn about our country
While I was astonished that such a small baby was carrying load on his head, my driver explained that the lady might have walked some 5-6 km with her son to sell her paddy. Her husband might be a day labour and the son was not only helping her in carrying paddy but was also protecting her (‘Maa-yer Rak-kha korche’ as he had said). That day I had something more to learn about our country
2 comments:
Minute detailing of the topic is the beauty of your writing.
Inspiring one!
Well written! With sensitivity and care..things most needed in the Indian administration today.
Cheers!
Nalin
Post a Comment