Unable to procure enough wheat for public distribution, the government is relaxing rules in a bid to allow more private agencies to help the Food Corporation of India (FCI) procure enough foodgrain.
While production of wheat touched 75 million tonnes (mt) this year, the government could procure only about 11mt. In the ongoing paddy season, the procurement so far has been 10.99mt, but the Centre has targeted at least 25mt.
“The government is looking at creating a scenario whereby more private players can help FCI in procurement of foodgrain meant for the Central pool,” said a senior food ministry official who did not wish to be identified. “To facilitate this, the food ministry is relaxing guidelines, which will allow more private parties to participate in procurement.”
SLIPPING ON TARGETS (Graphic)
The government, for the first time in April this year, had formally invited private sector participation in foodgrain procurement, which, until then, was done by FCI.
However, the guidelines for private agencies were so stringent, as reported in Mint on 18 May, that only National Collateral Management Services Ltd (NCMSL), jointly promoted by several banks, National Commodity & Derivatives Exchange Ltd, Indian Farmers Fertiliser Cooperative Ltd and other cooperative bodies, could qualify.
NCMSL, along with National Agricultural Cooperative Marketing Federation of India Ltd (Nafed), a cooperative largely involved in procuring pulses and edible oils, had helped procure wheat in states such as Uttar Pradesh, Bihar and Orissa last season.
According to FCI officials, who did not wish to be identified, potential bidders following the impending relaxation of guidelines could include National Bulk Handling Corp. Ltd, an associate of Multi Commodity Exchange of India Ltd and OLAM Exports (India) Ltd, which manufactures and exports nuts and is into retailing of bakery products.
The existing guidelines, which also extend to cooperatives, specify that only private companies or organizations in which either the Union government or banks/financial institutions have more than 51% equity can participate.
It also lays down that these companies should have been in the agriculture-related business for the last five years; should have had employed at least 100 people in the previous year; and have a minimum paid-up capital of Rs5 crore at the end of the last fiscal year.
“We would like more players to help us in procurement business. While in Punjab and Haryana, FCI can pretty much do this on its own, private participation can help us procure grains in other states,” said Alok Sinha, chairman and managing director of FCI.
Sinha is hoping that private parties will help in collecting paddy for the Central pool this season in West Bengal, Orissa, Bihar and Chhattisgarh, where procurement will begin in two weeks’ times.
FCI officials, who did not wish to be identified, said the new set of guidelines are imminent. Private companies as well as state agencies that qualify will be entitled to a commission of 2.5% of the minimum support price.
With FCI’s staff strength being halved to streamline the organization, involving private parties in the procurement business will give it added manpower as well as logistical support.
FCI currently competes with companies such as ITC Ltd and Cargill Inc. in procuring foodgrain from mandis, or wholesale markets.
“A single private player has the limitation of logistics, capital and capabilities of managing the humongous task of procurement. In fact, the canvas can be broadened to involve all those who have the wherewithal of procuring foodgrain, including farmers,” said Vijay Sardana, managing director, Anand Rathi Commodities International.