Model Answer
0 min readIntroduction
The Government of India’s procurement policy is a cornerstone of its agricultural strategy, aimed at ensuring food security and supporting farmer livelihoods. Prior to the 1990s, procurement was largely focused on wheat and rice in surplus states, primarily through the Food Corporation of India (FCI). The post-liberalisation period witnessed a gradual shift in this approach, driven by economic reforms, budgetary constraints, and the need to address regional imbalances in procurement. This evolution has significantly impacted agricultural prices, creating both opportunities and challenges for Indian farmers and the overall agricultural economy. The recent farmer protests (2020-21) further highlight the complexities surrounding procurement policies.
Evolution of Procurement Policy Post-Liberalisation
The economic liberalisation of 1991 initiated a gradual shift in the government’s approach to agricultural procurement. Key changes included:
- Decentralisation of Procurement: Greater responsibility was devolved to state governments, allowing them to tailor procurement strategies to local conditions.
- Open-Ended Procurement: The FCI continued open-ended procurement of wheat and rice, meaning it would purchase any quantity offered by farmers at the MSP. This was primarily focused on Punjab, Haryana, and Uttar Pradesh.
- Introduction of Price Deficiency Payment Scheme (PDPS): Introduced in states like Madhya Pradesh and Haryana, PDPS aimed to provide direct income support to farmers when market prices fell below the MSP. This reduced the logistical burden on the FCI.
- Encouraging Private Sector Participation: Attempts were made to encourage private sector participation in procurement, storage, and distribution, though with limited success due to various constraints.
- Expansion of Procurement Basket: While wheat and rice remained dominant, efforts were made to include pulses, oilseeds, and cotton under the procurement scheme, though coverage remained uneven.
Impact on Agricultural Prices
The procurement policy has had a multifaceted impact on agricultural prices:
- MSP as a Benchmark: The MSP, determined by the Commission for Agricultural Costs and Prices (CACP), acts as a price signal for farmers and influences market prices. Procurement at MSP ensures that farmers receive a guaranteed price, preventing distress sales.
- Price Distortion: Concentrated procurement in a few states (Punjab and Haryana for rice and wheat) has led to price distortions. These states benefit from higher procurement levels and MSP-driven prices, while other states may face lower prices.
- Impact on Market Prices: FCI’s stockholding operations influence market prices. Excess stock can depress prices, while shortages can lead to price increases.
- Regional Disparities: Procurement policies have exacerbated regional disparities in agricultural development. States with robust procurement infrastructure and favourable policies tend to attract investment and experience higher agricultural growth.
Challenges and Issues
Despite its objectives, the procurement policy faces several challenges:
- High Procurement Costs: The cost of procurement, storage, and distribution is substantial, placing a significant burden on the government’s budget.
- Inefficient Storage Infrastructure: Inadequate storage capacity leads to wastage and deterioration of procured grains.
- Distortion of Crop Patterns: MSP-focused procurement incentivizes farmers to grow wheat and rice, leading to imbalanced crop patterns and environmental concerns (e.g., groundwater depletion).
- Limited Coverage: A large number of farmers, particularly small and marginal farmers, are excluded from the benefits of procurement due to logistical constraints and lack of awareness.
- Lack of Market Integration: The procurement system often operates in isolation from market forces, hindering the development of efficient agricultural markets.
Recent Developments & Reforms
Recent initiatives aim to address these challenges:
- Pradhan Mantri Annadata Aay Sanrakshan Yojana (PM-AAS): Launched in 2018, PM-AAS encompasses three sub-schemes: Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS), and Private Procurement & Stockist Scheme (PPSS).
- Centralised Procurement Portal: Efforts are underway to create a centralised procurement portal to streamline the procurement process and improve transparency.
- Diversification of Procurement: The government is attempting to diversify procurement to include more crops and states.
| Scheme/Policy | Objective | Key Features |
|---|---|---|
| Minimum Support Price (MSP) | Provide price guarantee to farmers | Announced for 23 commodities; Procurement primarily focused on wheat & rice |
| PM-AAS | Support farmers by ensuring remunerative prices | Includes PSS, PDPS, and PPSS; State governments have a key role |
| National Food Security Act (NFSA) 2013 | Ensure food security for vulnerable sections | Provides subsidized food grains through the Public Distribution System (PDS) |
Conclusion
The Government of India’s procurement policy has played a crucial role in ensuring food security and supporting farmer incomes, particularly in the post-liberalisation era. However, the policy faces significant challenges related to cost, efficiency, regional disparities, and crop diversification. Future reforms should focus on strengthening market integration, expanding procurement coverage, improving storage infrastructure, and promoting sustainable agricultural practices. A more holistic and market-oriented approach is needed to ensure the long-term viability of Indian agriculture and the welfare of its farmers.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.