Damaged Wheat Procurement: States to bear the burden of relaxed specifications

It is difficult to assess the quantity of wheat which will be procured by MP, Punjab and Haryana under relaxed specifications.

In a normal year, the procurement of wheat reaches its peak around Baisakhi. In the current rabi marketing season (RMS) 2023-24, the market arrivals and procurement in Punjab and Haryana are very low. As on April 13, Punjab has procured just 3.52 lakh tonnes while Haryana has procured 4.34 lakh tonnes. Krishi Bhawan would be hoping that the arrivals will pick up now that the weather has become quite hot, and farmers will already be harvesting their crop. It would be an achievement if the estimate of procuring 341.5 lakh tonnes is met.

Madhya Pradesh (MP) has procured 23.27 lakh tonnes (as on April 14) and it is the only state where the wheat procurement is satisfactory. Procurement starts around March 15 in the state and the Union government (Department of Food and Public Distribution) relaxed the specifications of wheat on March 31, 2023.

Procuring Weather-damaged Grain

Procuring agencies of MP were allowed to procure ‘lustre loss’ wheat up to 10 percent, without any value cut. It means that farmers who bring wheat up to 10 percent lustre loss got the full minimum support price (MSP) of Rs 2,125 per quintal. Lustre loss in wheat refers to loss of shine caused by unseasonal changes in weather conditions during the grain ripening stage. Such grain cannot be stored for long as they are prone to pest attack. For wheat having lustre loss of 10-80 percent, farmers are to face a value cut of Rs 5.31 per quintal and they will be paid Rs 2,119.69 per quintal.

In the case of Punjab, Haryana and Rajasthan, the Union government issued orders of relaxation in wheat specifications on April 10, 2023. Here also, the decision is that value cut will be imposed on farmers for shrivelled and broken grain if they are more than 6 percent. Various slabs of value cut have been prescribed depending on the percentage of shrivelled and broken grains.

If a farmer brings wheat which has shrivelled and broken grains above 16 percent (and up to 18 percent), he will face a value cut of Rs 31.87 per quintal. As a result, he will be paid Rs 2,093.13 per quintal, instead of the full MSP of Rs 2,125 per quintal.

In Punjab and Haryana, relaxation has been given for lustre loss wheat also. For wheat with up to 10 percent lustre loss, there is no value cut. For grains with lustre loss of 10-80 percent, a farmer will face a value cut of Rs 5.31 per quintal and he will be paid Rs 2,119.69 per quintal instead of the full MSP of Rs 2,125 per quintal.

The damage to the standing crop of wheat in MP, Punjab, Haryana and Rajasthan was due to relatively high temperatures in February and untimely rains in March 2023. It was surely not the fault of the farmer. So, the governments of MP and Punjab have already announced that even if a farmer’s wheat was procured under URS, he will get full MSP and no value cut will be imposed on him. The burden of value cut will be borne by the state government out of its own budget. In the instance of MP, if the procurement of lustre loss wheat under relaxed specifications (URS) is half of the total procurement (40 lakh tonnes out of the total procurement of 80 lakh tonnes), the burden on the state will be Rs 21.24 crore.

It is difficult to assess the quantity of wheat which will be procured by MP, Punjab and Haryana under relaxed specifications. One hopes that at the end of the rabi marketing season, the figures of wheat procured under different categories of URS will be released by the Union government for each state.

Segregated Stacking

The Union government has also directed that wheat procured under URS should be stored in separate stacks. Since there are many slabs of value cut imposed by the Centre, the procuring agency of the state is expected to store them in different stacks. This condition is very difficult to satisfy due to operational difficulties at the level of the warehouse.

The Centre has further directed these states to issue the wheat procured under relaxed specifications on an overriding priority. It means that wheat procured under URS this year will be handed over to FCI before the wheat procured in previous years under fair average quality specifications (FAQ).

All the orders of relaxations mention that any financial implication due to this relaxation will be the responsibility of state governments. As a result, state governments will not be reimbursed crores of rupees when they hand over URS wheat to FCI for movement to other states. In RMS 2011-12 also, relaxation in wheat specifications for lustre loss in nine districts of Punjab was given by the Union government but such a condition was not imposed.

The estimate of wheat procurement in Punjab and Haryana in the current RMS is 132 lakh tonnes and 75 lakh tonnes, respectively. If the ratio of wheat and rice under the National Food Security Act, 2013 (NFSA) remains the same as in February 2023, the allocation of wheat under the NFSA in 2023-24 in Punjab may be just about 8.70 lakh tonnes. For Haryana, the allocation may be only 7.95 lakh tonnes. The estimate of procurement in MP is 80 lakh tonnes but the allocation of wheat under the NFSA may be only about 13.35 lakh tonnes.

It means that these states will hand over large quantities of wheat to FCI for movement to other states and FCI will pay them after the deduction of value cuts. These wheat surplus states, procuring wheat for the food security of India are going to bear the financial burden on account of procurement of wheat under relaxed specifications. It would have been better if the Union government also bore half the expenditure on value cut, rather than asking farmers to bear it.

Siraj Hussain is a former Agriculture Secretary to the Government of India. Views are personal, and do not represent the stand of this publication.