It was feared that elevated temperatures in February and untimely rains in March would have caused substantial damage to the wheat crop. The stock in the central pool on April 1, 2023 was 8.35 million tonnes, only slightly above the buffer norm of 7.46 million tonnes. In a normal year the procurement peaks on Baisakhi day, April 14. This year, only 41.7 lakh tonnes of wheat was procured by that date. The last 15 days have brought cheers and by the end of April, the procurement has reached 222.88 lakh tonnes. Yet again, the two states – Punjab and Haryana – which earned a lot of uninformed criticism during the farmers’ agitation for their farm policies, have provided food security to the nation.
The Union government acted well in time and relaxed the specifications for wheat. Even though the Centre will not bear any financial burden of the relaxations, it has managed to avert a worrying situation caused by untimely rains and heavy winds of March and early April.
Due to a well-functioning system of APMCs (Agricultural Produce & Livestock Market Committees), wheat procurement in Punjab, Haryana and Madhya Pradesh is mostly in mandi premises, where the procurement agencies of the state government purchase wheat brought by the farmers. As a result, procurement in these states has remained mostly stable over the years. Last year was an exception as the heat wave of March 2022 resulted in lower productivity, due to which the overall wheat procurement was only 187.9 lakh tonnes, much lower than the allocation for PDS and welfare schemes.
As a result, even in predominantly wheat-eating states of north India, the government had to provide rice instead of wheat. This was possible due to a record high procurement of rice in the last few years.
UP is the largest producer of wheat. The state accounts for about 31% of India’s total production; it produced more than 350 lakh tonnes of wheat in 2020-21. During that year, it procured 35.8 lakh tonnes. Next year in 2021-22, the procurement went up to 56.4 lakh tonnes. The expectation was that UP had streamlined its procurement machinery, but in 2022-23, it could procure only 3.3 lakh tonnes. This year again, the procurement in the state has been very low and only 1.31 lakh tonnes has been procured by April 30, 2023.
One reason is that the APMCs in UP are not well organised, and it seems that a lot of agri-trade takes place outside the APMCs. This is reflected in the data on market arrivals of wheat. According to the Agmarknet portal, the total arrivals of wheat in UP were only 1.79 lakh tonnes as on April 30. It is not known if the Mandi Board is able to collect the 2.5% mandi fee applicable to all the purchases of wheat, even if they are outside the physical premises of APMCs.
Source: Food Grain Bulletins of various years
In UP, procurement continues in May and June, too. If the state can procure 40 lakh tonnes, the overall procurement in the country may still reach 250-275 lakh tonnes. This will check cereal inflation and will be good news to the RBI and the government, especially in view of the threat of El Niño, which may cause a drought and consequently reduce production of rice in the kharif season.
Despite the good news on the procurement front, the differences between the Union government and Punjab continue.
In 2020, when the farm laws [primarily, The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020] were enacted, several states had reduced the market fee and other charges. However, these have gone back to their previous levels. For the agriculturally dependent states, like Punjab, it is an important source of revenue.
Punjab collects 3% each as market fee and rural development fund (RDF). In years of high wheat procurement across India (for example, 433 lakh tonnes in 2021-22), the Union government was pushing Punjab to reduce these charges as they are borne by the Centre. Reports in the media suggest that the Centre owes ₹2,872.40 crore to Punjab on account of RDF.
The arhatiyas (commission agents) charge 2.5% of MSP in both Punjab and Haryana. The facilities provided by them to the farmers have not been increasing but their charges are linked to the MSP, which goes up year after year due to the increase in the cost of cultivation. Because of their political clout and deep engagement with farmers, who avail themselves of consumption credit from arhatiyas, Punjab is not able to cap the commission. In fact, commission is payable to them even at bulk wheat silos where commission agents play no role and the farmers can directly bring their wheat to silo premises instead of taking it to APMC first. Many years ago, I chaired a committee and recommended that arhatiya commission needs to be capped.
Punjab and Haryana are not the only states which charge market fees. UP, Rajasthan and Madhya Pradesh also do the same. In 2020, in the wake of farm laws, Madhya Pradesh had removed the market fee, but it was brought back to 2%.
If public distribution continues in its present form, where food grains are distributed (now free of charge) even in agriculturally surplus regions, the Centre will continue to depend on Punjab and Haryana for procurement. They will thus remain at the forefront of India’s food security.
The Centre should therefore acknowledge the critical role of these states and reach a consensus on financing their agricultural and rural infrastructure. Even though their mandi infrastructure is better than most states, they also need to invest more to upgrade it, particularly for perishable produce.
Siraj Hussain is a former Union agriculture secretary.
