Procurement prices ameliorate a system in which the trade squeezes farmers’ profit margin at harvest time

An edited extract from an article written by a New Delhi contact, Devinder Sharma, presents hints at an approach which might be welcomed and modified for use by those working for a fairer system for British food producers.

devinder 5Nearly half a century after the Green Revolution was launched in 1966 by then Prime Minister Indira Gandhi, India has emerged out of the throes of a “ship-to-mouth” existence when food aid would come directly from the ships into the hungry mouths. The quantum jump in food production over the years has turned India into a net agricultural exporter. But while the Green Revolution certainly helped the country take care of its food needs, it bypassed the small and marginal farmers. At the same time, while production increased manifold, hunger grew.

Setting up a Commission for Agricultural Costs and Prices (then Agricultural Prices Commission) ensured an assured minimum support price for the farmers thereby providing them with an incentive to produce more.

At the same time, the Food Corporation of India (FCI) was set up to mop up the surplus harvests flowing into the dedicated agricultural markets, which were used for public distribution among the needy across the country through a vast network of ration shops.

Procurement prices, limited to staples – wheat and rice

Before the Green Revolution and the setting up of the Agricultural Prices Commission, farmers were free to sell their produce to anyone who offered them good prices. It was known to be an exploitative system wherein the trade squeezed the profit margin of farmers at the time of harvest. It was only when procurement prices were introduced that farmers got an assured price for their produce, and that is what encouraged them to produce more. Procurement prices helped farmers to realise a fair and better price for their produce.

selling wheat indian market

The WTO and pro-reform economists see less profit in food security

Pro-reform economists now call procurement prices an “archaic provisions of a socialist era” and want to abolish the Agricultural Produce Marketing Committee Act (APMC) that allows farmers to bring the produce to designated markets where the private trade is first allowed to make purchases. Only when there are no private buyers left do the FCI or the State procurement agencies step in to buy whatever is available at the minimum support price or procurement price.

At the Ministerial Conference of the World Trade Organisation (WTO) held at Bali in Indonesia in December 2013, the United States backed by the European Union challenged these food security provisions. An agreement was reached wherein India accepted a “Peace Clause” for an interim period of four years.

In those areas where markets operate freely, Sharma reports that the agrarian crisis is the worst

India’s own Commission for Agricultural Costs and Prices, however, is also asking that the procurement system, built so assiduously over the decades, be dismantled. The argument is that farmers should be left free to sell to whomsoever they want thereby encouraging better competition and thereby realize a higher price.

Considering that only 30% of India’s 600 million farmers have access to procurement prices, the markets should have helped the remaining 70% to reap a bounty. But that does not happen.

A fair procurement price for all produce might seem a totally unacceptable concept to ‘the trade’, but – it must be repeated until understood – food production is necessary for survival and therefore must be encouraged and assisted, not ruled by market speculation.



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