PDS: FCI, MSP, Procurement &Storage

HLC recommends that FCI hand over all procurement operations of wheat, paddy and rice to states that have gained sufficient experience in this regard and have created reasonable infrastructure for procurement" —--> Does it indicates that, state should own the cost of MSP without central government help? Whether the central government will money to state government later?

It’s a good question. The answer lies in the recommendation of the committee in saying that:

“If the states want to procure more for THEIR consumption, then they need to pay for it!!”

Assume this:

Your grandpa has been buying all that the farmers produce and sharing it with his 5 sons.

Now, all these 5 sons are also supervising individual households of these farmers.

Say that, each son has 100 farmers under him and he has to feed 500 people under him.

Now, what your grandpa did is simple: he said: "my sons, let the ablest among you, buy themselves from the farmers".

"I will pay as long as you buy, as much as you require paying for your households. The minute you want to buy more, to satisfy the farmers, then I won’t pay for that rice!!!"

"That is your problem, if you want to keep the farmers happy by buying all that they produce!"

Now: FCI=grandpa

Sons=states

Centre should make it clear to states that in case of any bonus being given by them on top of MSP, Centre will not accept grains under the central pool beyond the quantity needed by the state for its own PDS " —> why the central government will not accept it ? Is the surplus grains have to be stored in central government owned FCI? Where the surplus grains will go if central government don't accept it?

Ok, the Central Government will not accept for simple reason:

Grandpa says: "I agreed to buy the rice at Rs 50 per kg! But, if you, my dear son, wants to buy it at Rs 60, thus giving 10 Rs bonus to your farmers, be clear that I won’t buy that rice!"

The grandpa will accept it only as much as the need has been. Extra will not be allowed to be stored in the FCI godowns!!

So they will be sent back!! The state has to find a place for that!! States also procure grains!

Got it sir... So always the state government needs central government's storage space?

FCI has got established space! States have not created such huge capacity!

As collectors, we have procured grains, like Ragi, and stored them temporarily in even shaadi mahals!

But some states have storage sir?

Yes, it’s purely left to the state's capacity!!

Yes I remember seeing in Haryana and Punjab.

Indeed, in Karnataka, they have a state warehousing corporation!!

But, nothing can match the reach of FCI!! The huge long godowns that you see in railway goods yard belong to FCI!!

So if the state buys grain beyond the central price, the centre won’t accept it. Is it so sir?

Yes, it will not accept the grains!

Here it’s given as "beyond the quantity needed by the state for its own PDS"?

Yes, each state is allotted a particular quantity of grains, along with contribution towards its cost. Now, if Karnataka is allotted 100 MT, then if the Karnataka buys more than 100 MT, centre will not store in it his godowns.

In between how is farmer going to be benefited Sir?

Farmer has not asked the government what he should grow. Isn’t it? So, if he has taken a risk, he has to bear it.

State government shall sell that surplus in open market or how it will store that surplus grain, sir?

That is state government's headache! They do sell in open market too!!

The business of fixing irrational MSP's has led to inflow of huge grains into FCI and the open market the farmers are scared of being exploited and this leads to more pressure on existing warehouses

If Karnataka government limit is 100 MT, then FCI can store 100 MT and not beyond that limit. Am I correct sir?

Yes