[‘Daily News Updates’ will provide you with a simplified understanding of the important economic/financial events across the country]
Record Wheat Procurement in 2020-21 Rabi Season
In the 2020-21 Rabi season, a record 109.2 million tonnes of wheat was produced, of which a record 43.3 million tonnes or 40% was procured by Government agencies. Wheat procurement has increased over the last five years, from 31% in 2016-17 to 40% this season. The highest procurement was from Punjab (13.2 million tonnes), followed by Madhya Pradesh (12.8 million tonnes). About 4.9 million farmers sold their produce to the Government, an increase of 13% from last season. This shows that the number of farmers selling to the Government is increasing rapidly.
[How does the procurement scheme work? Minimum Support Price (MSP) is the price at which the Government purchases crops from the farmers. (Sometimes, the purchase price can be more than the MSP. The MSP basically serves as a floor price to provide guaranteed minimum prices to farmers). The Commission for Agricultural Costs and Prices (CACP) recommends the MSP for 23 crops (14 Kharif crops, 6 rabi crops as well as sugarcane, jute and copra) before the commencement of the sowing season. The Food Corporation of India (FCI), state agencies and co-operatives procures crops from the farmers to ensure the implementation of the MSP scheme].
The increasing procurement is a cause of worry for the agricultural sector. The MSP scheme has mainly been counter-productive for the agricultural sector. It benefits only the more affluent farmers and skews incentives towards particular crops (like paddy in Punjab), which leads to over-exploitation of natural resources (depletion of the water table in Punjab is a case in point).
In a previous edition of Daily News Updates, we noted that “the Government announced an increase in the Minimum Support Price (MSP) of various crops, adhering to the policy of offering farmers at least 50% of their cost of cultivation. The price hike is a clear attempt to nudge farmers away from producing cereals (like rice which is in abundance) and shifting towards oilseeds and pulses (which India imports in large quantities). Consequently, the hike in the latter is much more pronounced, and the Government hopes that this will lead to better crop diversification.” The Government can consider using the same strategy for wheat in the upcoming Rabi season to nudge farmers away from over-producing wheat.
Finance Ministry Expanded; Department of Public Enterprises Added
The Department of Public Enterprises (DPE), which was a part of the Ministry of Heavy Industries and Public Enterprises, has now been added to the Finance Ministry. The Finance Ministry now has six departments. Further, a new ministry named the Ministry of Co-operation was created, which will provide a separate administrative, legal, and policy framework for strengthening the cooperative movement in the country. Cooperatives, as an economic model, will be encouraged, and the ministry will strive to improve the Ease of Doing Business for them.
[A cooperative is an organisation run jointly by all its members who share the profits and the benefits. The most famous example in India is Amul, jointly owned by 36 lakh milk producers].
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