Wheat farmers in Uttar Pradesh are a worried lot. Procurement of the foodgrain by government agencies in the State is meagre and a likely bumper harvest this year is stoking fears of a further slide in prices.
UP contributes almost a third to the country’s total wheat production, with an annual output of around 25-27 million tonnes. But the procurement target set by the Food Ministry for UP is just 3 million tonnes for this year.
Procurement of wheat by State agencies in UP has been poor historically but last year it was significantly lower. Of the State’s total marketable surplus in wheat in 2015-16, only 4 per cent was procured by government agencies (State and Central put together) at the Minimum Support Price (MSP). This was down from 14 per cent in the previous year.
With arrivals about to start after a bumper wheat crop, farmers fear that wheat prices can fall unless procurement increases. From about ₹1,830/quintal in January, wheat prices have come down to ₹1,746/quintal now. The MSP of wheat is ₹1,625/quintal.
Last fiscal, 73.4 per cent of the marketable surplus of wheat in Punjab was procured by government agencies. The share of Punjab in overall wheat production in the country is, however, much lower at 17.8 per cent. Similarly, almost 70 per cent of the marketable surplus of wheat in Haryana was procured last fiscal, showing UP in a poor light.
A recent report from Commission for Agricultural Costs and Prices (CACP) shows that wheat procurement is happening effectively in only three States — Punjab, Haryana and Madhya Pradesh. Punjab and Haryana have 1,734 and 365 procurement centres, respectively, but they do a better job than the 4,000 plus centres in UP.
If the procurement agencies do not actively buy in the coming season, there is risk of wheat prices falling sharply and hurting farm incomes.
Lower procurement in UP is due to the failure of the State mechanism, says an official from the Food Corporation of India, who spoke on condition of anonymity. “Procurement is mainly carried out by the State governments. In wheat, for instance, of the total procurement in a year, 85 per cent is bought by State agencies. But, if you see in UP, the State government doesn’t show interest. They have not developed the infrastructure. There are no proper roads for farmers to bring the produce to the centres and facilities inside the procurement centres are also bad; there is no electricity, no storage facility…”
Farmers in UP face one more problem while selling to government agencies – delayed payment. According to Teresa John, Economist at Nirmal Bang Institutional Equities, who put out a report taking stock of UP’s agriculture and industrial situation last week, “Many small farmers in the State prefer to sell their produce to middlemen because of delayed payment, some of them complain of a delay of more than three months….”
Another reason for UP’s poor procurement is that it has let trade cartels function, says Pravesh Sharma, former MD of Small Farmers’ Agri Business Consortium. “The change in government in UP over last several years hasn’t ensured change in policies as the cartels that control the agriculture market have continued to function and get political patronage across party lines. Till the political support to existing trading practices is not withdrawn, we cannot expect farmer-friendly markets to emerge,” says Sharma.