Wheat farmers prefer pvt stockists, bulk consumers to govt agencies

Private stockists and bulk consumers have emerged as major buyers for wheat this rabi harvesting season, as government agencies seek the receipt of land holding and details of bank accounts before dealing with farmers.

Industry sources said private bulk traders have booked huge warehousing spaces with collateral management companies, amid expectations of a bumper procurement of wheat at around 5 per cent discount to the minimum support price (MSP) of Rs 1,840 a quintal. Despite government agencies offering higher rate of MSP, wheat farmers are preferring to sell their produce to private traders to avoid the fear of non-payment from government agencies on their failure to furnish land receipt and bank account details.

As a consequence, government agencies, including the Food Corporation of India (FCI) and state warehousing corporations, have slowed their wheat procurement this year. In fact, the FCI relaxed procurement norms for wheat due to the drought in some parts of the country this year with aim to encourage farmers for wheat supply.

“Private traders are more active than government agencies this year due to the latter seeking land receipt and bank account details before procuring wheat from farmers. Therefore, farmers fear that payment would be delayed in case these details are not furnished to state agencies. Hence, farmers choose safe sale of their wheat inventory at the hands of private traders for upfront cash payment at around Rs 100 per quintal or nearly 5 per cent discount to the MSP,” said Amith Agarwal, Director at Star Agriwarehousing & Collateral Management.

Data compiled by the FCI showed total procurement of 5.5 million tonnes of wheat by FCI and other state agencies as of April 22, 2019. Total wheat procurement in the last season by the FCI and other state agencies was reported at over 35.8 million tonnes, over 37 per cent of India’s total estimated output of 97 million tonnes.

“The government buying of wheat has not started as aggressively as farmers anticipated before the season due perhaps to changes in regulation. Farmers who thought that the government would come and buy wheat, are having concerns on credit receivables due to land title and subsidy entitlement. Thus, private traders have been active in those markets,” said Ramesh Doraiswami, Managing Director and Chief Executive Officer, National Bulk Handling Corporation (NBHC).

Meanwhile, the governments of Punjab and Haryana have already developed their model for wheat procurement by government agency which is yet to be replicated in the states like Madhya Pradesh and Uttar Pradesh. Therefore, procurement policies keep changing in sync with the government’s requirement and farmers’ sentiment.

For example, the Madhya Pradesh government announced Rs 200 a quintal as bonus over and above its minimum support price (MSP) last year resulting into a massive procurement by government agencies. This year, however, the Madhya Pradesh government has not announced any such bonus which feared farmers about its continuation.

Similarly, the Uttar Pradesh government also promoted procurement of wheat last year with much aggression which disappeared this year.

“There has been increased booking of warehousing space from private traders this year especially in Uttar Pradesh than last year. Hence, we can certainly say that private players are more active than government agencies,” said Sanjay Kaul, Managing Director and Chief Executive Officer, National Collateral Management Services Ltd (NCML).

Interestingly, the government procurement has been very slow in the areas where the general election concluded. Elsewhere, government machineries are busy with election preparations. Obviously, therefore, the farmers’ issue is on the backburner.

Wheat wave
  • Farmers prefer selling wheat to private players over govt agencies
  • Trade sources claim that govt agencies seek land receipt and bank account details; farmers fear non-payment
  • Madhya Pradesh govt withdraws Rs 200/quintal bonus this year 
  • Slow procurement by govt agencies this year compared to private ones
  • India’s wheat output estimated at 99.12 million tonnes for 2018-19 
  • 16 mt inventory in FCI much higher than central pool’s requirement

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