Review Open-Ended Grain Procurement: CACP

The Commission for Agricultural Costs and Prices (CACP) has called for a review of the government’s open-ended grain procurement policy to restrict rice and wheat purchase from the farmers for the meeting requirement under the National Food Security Act.

The open ended procurement policy for rice and wheat has resulted in accumulation of huge stocks of rice and wheat, and distorts cropping pattern and leads to over exploitation of groundwater, CACP has stated in its report on price policy for rabi crops for the marketing season (2024-25).

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The Food Corporation of India (FCI) and state agencies purchase around 80 – 85 million tonne (MT) rice and wheat annually from the farmers for meeting the need under NFSA where 800 million people are provided 5 kg grain per month free.

Alternatively, the commission has suggested compensation to the farmers for additional marketed surplus through Price Deficiency Payments. where farmers are compensated for the price difference between average mandi prices in key producing states and the minimum support price (MSP).

“Since wheat procurement in Bihar, Rajasthan and Uttar Pradesh iis low, the Commission recommends strengthening of procurement operations in these states,” according to the report.

CACP recommends MSP for 23 crops to the government. Based on CACP recommendation and inputs from the state government, the cabinet approves MSP of the crop.

In order to enhance domestic production and ensure remunerative prices to farmers growing pulses and oilseeds, the commission has recommended that the ceiling for procurement of pulses, in particular, arhar, urad and lentil, where import dependence is high, should be reviewed.

India imports about 15% of its pulses consumption, especially tur, urad and lentils.

In order to protect oilseed farmers from adverse impact of import of edible oils which according to trade estimate is likely to be 17 million tonne (MT) in 2022-23 oil year (November-October), the commission has recommended a dynamic tariff structure linked to world prices, demand supply situation, domestic prices of edible oils and MSP of oilseeds should be introduced.

Indian imports around 56% of its annual edible oil consumption.

In order to improve capacity utilization of the domestic edible oil refining industry, the commission has suggested a duty differential of about 15% between crude and refined oil should be maintained to discourage import of refined oils.

The Solvent Extractors Association of India, an apex body of top edible oil companies, has urged the government to increase the gap between effective import duty on crude and refined edible oils. Currently, the effective import duty on crude edible oil is 5.5% and that on refined oil is 13.75%.

Stating that domestic consumption of edible oils has increased at a faster pace than domestic production, the commission has stated that for reducing import dependency, “special efforts are needed to increase production of major oilseeds such as mustard, sunflower and tap potential of non-conventional oils such as rice bran oil, corn oil, etc.”

Source: The Financial Express

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