Wheat Procurement in India: Bonus Battle Heats Up as Buffer Stock Dwindles
Buffer Stock Depleting, Government Aims to Procure 30-32 Million Tonnes of Wheat
India’s wheat procurement season for the rabi marketing season (April-June) 2024 has begun. This year, the government is aiming to procure 30-32 million tonnes of wheat to replenish its buffer stock, which has dwindled to an eight-year low.
Why is the Buffer Stock Low?
The decline in the buffer stock is due to two main reasons:
- Low Procurement Last Year: In the previous marketing season, the government agencies procured only 26.2 million tonnes of wheat, falling short of the target of 34.15 million tonnes.
- Open Market Operations: To control rising wheat prices over the last two years, the government of India sold wheat from its buffer stock through open market sales. This significantly depleted the government’s stock.
Madhya Pradesh and Rajasthan Announce Bonus on Wheat Procurement
In an effort to incentivize farmers to sell their wheat to the government and meet its procurement target, Madhya Pradesh and Rajasthan have announced a bonus of Rs 125 per quintal over and above the minimum support price (MSP) of Rs 2275 per quintal set by the central government. This will effectively increase the price that farmers receive to Rs 2400 per quintal in these two states.
Madhya Pradesh Aims to Become the Largest Wheat Contributor
Madhya Pradesh, the second-biggest contributor to the central pool wheat stock after Punjab, is aiming to procure a record 8.2 million tonnes of wheat in the 2024-25 rabi marketing season. This increase in procurement is expected to help the government meet its overall wheat stock target.
Wheat Production in India
India is the second-largest producer of wheat in the world after China. According to the government of India, the total wheat production in the country in 2022-23 is estimated at a record 1105.54 lakh tonnes. Uttar Pradesh is the largest wheat-producing state in India, followed by Madhya Pradesh and Punjab.
Challenges in Wheat Procurement
Despite the bonus offered by some states, there are still challenges in wheat procurement this year.
- Delayed Harvest: Recent rains have delayed the wheat harvest, leading to a slow arrival of crops in the market. This could impact the initial procurement process.
- Competition from Private Traders: If the market price of wheat remains higher than the MSP, farmers might be inclined to sell their produce to private traders instead of government agencies.
Government Initiatives to Promote Wheat Procurement
The government is taking several steps to encourage farmers to sell their wheat to government agencies:
- Increase in MSP: The government has increased the MSP for wheat by Rs 150 per quintal for the 2024-25 marketing season, compared to the previous year.
- Bonus by State Governments: Madhya Pradesh and Rajasthan’s bonus announcement is expected to incentivize farmers in these states to sell to government agencies.
- Early Procurement Start: Although the official procurement season starts on April 1, state agencies and the Food Corporation of India (FCI) have already begun purchasing wheat from farmers under MSP operations in Madhya Pradesh and Rajasthan.
Looking Ahead
The success of the wheat procurement season will be crucial for maintaining buffer stocks and ensuring food security in India. The government’s initiatives and the bonus offered by some states are positive steps. However, overcoming challenges like delayed harvest and competition from private traders will be important to achieve the targeted procurement levels.
FAQs:
1. Why are Madhya Pradesh and Rajasthan offering a bonus on wheat to farmers?
- Answer: Madhya Pradesh and Rajasthan are offering a bonus on wheat to farmers to incentivize them to sell their wheat to the government instead of private traders. This will help the states meet their wheat procurement targets and contribute to the national buffer stock.
2. What is the current minimum support price (MSP) for wheat in India?
- Answer: The current MSP for wheat in India is Rs 2,275 per quintal.
3. What is the buffer stock of wheat in India, and why is it important?
- Answer: The buffer stock of wheat in India is currently at a low level, close to the buffer stock target of 7.46 million tonnes for April 1, 2024. A buffer stock is important for food security purposes, as it allows the government to distribute wheat to the population in case of emergencies or shortages.
4. What are some of the reasons why the buffer stock of wheat has declined?
- Answer: The buffer stock of wheat has declined due to several factors, including lower procurement by government agencies in the last two seasons, open market sales to bring down wheat prices, and farmers selling their wheat to private traders at higher prices than the MSP.
5. What is the target for wheat procurement in India for the 2024-25 marketing season?
- Answer: The target for wheat procurement in India for the 2024-25 marketing season is 30-32 million tonnes.
6. What is the impact of the bonus offered by Madhya Pradesh and Rajasthan on other wheat-producing states?
- Answer: The bonus offered by Madhya Pradesh and Rajasthan may lead to farmers in neighboring states like Rajasthan demanding similar prices for their wheat. This could create a challenge for those states’ governments.
7. How does the decentralized procurement system (DCP) work in India?
- Answer: Under the DCP system, state agencies purchase grain from farmers at MSP, and surplus grain after meeting local PDS requirements is handed over to the Food Corporation of India (FCI) as part of the central pool stock.
8. What is the issue with states offering bonuses over the MSP?
- Answer: The central government may not take over surplus rice and wheat stocks from states that offer bonuses over the MSP if the procurement is beyond the requirement for the PDS and buffer stock. This can create problems for states that end up with excess wheat.
9. What are some alternative incentive schemes that states can offer to farmers instead of a bonus over MSP?
- Answer: Some alternative incentive schemes that states can offer to farmers include providing financial incentives based on land holding, similar to schemes in Odisha and Telangana.
10. What is the current situation with wheat harvesting in India?
- Answer: Recent rains have delayed the wheat harvest in India, which has impacted the arrival of wheat in the market and the start of procurement by government agencies.
11. Who is responsible for setting the MSP for wheat in India?
- Answer: The Commission for Agricultural Costs and Prices (CACP) recommends the MSP for wheat, and the central government fixes the final price.
12. What is the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme?
- Answer: The PMGKAY scheme is a free ration scheme that distributes wheat and rice to beneficiaries identified under the National Food Security Act.
13. How has the open market sale of wheat impacted inflation?
- Answer: Open market sales of wheat by the FCI have helped to bring down wheat inflation in India.
14. When does the official procurement of wheat for the rabi marketing season typically begin in India?
- Answer: The official procurement of wheat for the rabi marketing season typically begins on April 1st.
15. What is the largest wheat-producing state in India?
- Answer: Uttar Pradesh is the largest wheat-producing state in India.
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