Record Purchases At MSP By Government

In the 2021-22 crop year, the government is expected to disburse a record Rs 2.7 lakh billion to farmers for rice and paddy purchases through the Food Corporation of India (FCI) and state agencies' minimum support price (MSP) operation (October-September).

While Rs 2.37 lakh crore has already been given to farmers for the purchase of 120 million tonnes (MT) paddy and wheat, paddy procurement for the Rabi season is likely to start in April 2022 in southern states such as Tamil Nadu, Andhra Pradesh, and Telangana.

According to reports, the FCI and state agencies might buy roughly 17 MT of paddy from farmers in southern states during the current crop season. This would bring overall paddy and wheat procurement for the 2021-22 crop season (October-September) to more than 137 MT, a new high.

In the crop year 2020-21, Rs 2.44 lakh crore was transferred to farmers for the procurement of more than 128 MT of paddy and rice under the MSP operations, while Rs 2.04 lakh crore was provided to farmers by FCI and state government agencies for the procurement of 111 MT of paddy and wheat in the crop year 2019-20.

Wheat (a rabi crop) is bought by FCI and state agencies from April to June, whereas paddy is procured from October to September, as the cereal is harvested in both the Kharif and rabi seasons.

"The procurement of wheat in rabi (2021-22) and the estimated procurement of paddy in Kharif 2021-22 will cover 1,208 lakh metric tonnes of wheat and paddy from 163 lakh farmers, and Rs 2.37 lakh crore direct payment of MSP value to their accounts," Finance Minister Nirmala Sitharaman said in her Budget speech (2022-23).

Through MSP activities, the FCI and state agencies acquire paddy and wheat from farmers primarily in Punjab, Haryana, Madhya Pradesh, Chhattisgarh, Odisha, Telangana, and Andhra Pradesh. The heavily subsidized food grains bought from farmers are distributed to over 80 million recipients under the National Food Security Act (NFSA), as well as preserved as buffer supplies in case of emergencies.

Due to an open-ended procurement structure, FCI and state agencies acquire significantly more grain than is required by the NFSA, resulting in surplus grain inventories.

FCI and state government agencies now hold rice and wheat inventories of 54.89 MT, compared to the January buffer stock standards of 21.41 MT.

Farmers' cooperatives like NAFED buy pulses and oilseeds from farmers under the agricultural ministry's Price Support Scheme to keep buffer stockpiles. If prices decrease, NAFED buys from farmers by paying MSP. Similarly, when market prices fall below MSP, Cotton Corporation of India (CCI) begins purchasing from farmers.