Govt relaxes norms for private grain procurement

Govt relaxes norms for private grain procurement

New Delhi: The government has relaxed the norms governing private-sector participation in food procurement on behalf of the Food Corporation of India (FCI), wherein all companies engaged in business of warehousing or transport of foodgrains will be eligible.

The existing guidelines were so stringent that only one company, the National Collateral Management Services Ltd (NCMSL), had qualified.

“We reviewed the guidelines brought out by the ministry earlier and realizing that not many private parties could qualify, the ministry has relaxed the norms. Under the new set of norms, any state government can allow private players to help FCI procure grain in the particular state," said a senior food ministry official, who did not wish to be identified.

Mint reported on 1 November that the government was poised to relax rules to allow more private agencies to assist 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 12.4mt, but the Centre has targeted at least 25mt. “The government has been falling short of achieving targeted level of procurement for the last two years. NCMSL helped FCI procure wheat and paddy in areas where the agency does not have a stronghold, states such as Orissa and Bihar. Farmers were having problems getting the minimum support price (MSP) in these states and, therefore, procurement was low," said a senior official at NCMSL, on conditions of anonymity.

NCMSL is jointly promoted by several banks, National Commodity & Derivatives Exchange Ltd, Indian Farmers Fertiliser Cooperative Ltd and other cooperative bodies. The government, for the first time in April, had formally invited private sector participation in foodgrain procurement, which, till then, was done by FCI.

However, the guidelines for private agencies were so stringent, that only NCMSL could qualify. The guidelines specified that only private companies or organizations in which either the Union government or banks and financial institutions own more than 51% equity can participate.

It also laid down 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

“NCMSL procured 7.5 lakh tonnes of paddy last year from 22 districts of Orissa, three in Bihar and two in Madhya Pradesh. We are hoping to do substantial procurement this year," said the NCMSL official.

According to FCI officials, who did not wish to be identified, other potential bidders now include National Bulk Handling Corp. Ltd, an associate of Multi Commodity Exchange of India Ltd and OLAM Exports (India) Ltd, which produces and exports nuts, and is into retailing of bakery products.

According to Vijay Sardana, managing director, Anand Rathi Commodities International, the government has to be vigilant when involving private agencies in procurement. “The government has to keep a tab on the quality of grain procured by these players and it should specify actions that it will take if the quality is bad. Then there should be Internet-based monitoring of procurement by these agencies on a daily basis. Besides, the government has to ensure the condition of warehousing facilities that these agencies will provide," said Sardana.

He added these measures will check pilferage and rotting of grains besides corruption.