Financial Daily from THE HINDU group of publications
Monday, Apr 15, 2002
Agri-Biz & Commodities
FCI turns a messiah for all as clientele expands
NEW DELHI, April 14
WHICH is the country's largest, if not its only truly functional, mandi for foodgrains? A mandi where farmers sold over 40 million tonnes (mt) of wheat and rice, and buyers ranging from State Governments and civil supply corporations to exporters, roller flour millers and multinational branded atta majors purchased around 30 mt during the fiscal just ended.
A mandi that assures farmers a steady increase in the price of their produce, despite the quantum of their grain supplies far exceeding demand. A mandi that simultaneously keeps buyers happy by offering them grain at the most competitive rates.
A mandi, where farmers in 2001-02 sold wheat at Rs 610 per quintal, even as exporters sourced the same grain at Rs 425 per quintal for delivery at ports.
In short, a mandi that is a messiah not just for the farmer and below poverty line (BPL) consumer, but even for the likes of Cargill and Adani Exports Ltd!
For an answer, one doesn't really have to look beyond these three words: Food Corporation of India (FCI).
During 2001-02, a record 20.63 mt out of the total 68.76 mt of wheat harvested by farmers in the country ended up in FCI's godowns.
Similarly, of the estimated 90 mt of rice produced last year, roughly 20 mt is likely to be sold to FCI and its associate State agencies.
Thus, the venerable parastatal currently handles well over a quarter of the country's annual rice and wheat output. In terms of marketable surplus, FCI's share would probably be in the 45-50 per cent range.
In States such as Punjab, more than 70 per cent of the wheat and 80 per cent of the rice produced and virtually the entire marketable surplus goes towards official procurement.
It is only the odd farmer who now hawks his grain in any other `market' other than that of FCI.
On the buyer's side, the story is no different. Till recently, only the State Governments patronised the FCI, with the latter's grains being channelised to feed the vast network of fair price shops.
Indeed, FCI's original role was to procure sufficient quantity of foodgrains from farmers to meet the needs of the public distribution system (PDS).
But today, its clientele has expanded to include even exporters and flour millers. The accompanying table shows that of the total foodgrain offtake of 30 mt during 2001-02, the targeted PDS accounted for just 13 mt, even after including lifting under the Antyodaya Anna Yojana (AAY) for the `poorest of the poor' segment.
The special welfare schemes Sampoorna Grameen Rozgar Yojana, Food for Work, Mid-day meals and assorted disaster relief programmes -- consumed another seven m.t.
The remaining 10 m.t was wholly lifted by exporters and roller flour millers.
Since November 2000, the country has exported over six m.t of foodgrains, the entire quantity of which has been sourced from FCI's godowns. With FCI making available wheat at Rs 4,250 per tonne and parboiled rice at Rs 6,000 per tonne for export purposes only slightly higher than the corresponding BPL issue prices of Rs 4,150 and Rs 5,650 per tonne, respectively exporters have not found it worthwhile to source their grain from the `open' market.
The same is the case with millers. When FCI is supplying wheat at Rs 650 per quintal in the North and Rs 720 per quintal in the South all through the year, why would any miller buy from the open market, where prices would be ruling at least Rs 100 per quintal higher? In fact, it is no longer a secret that even makers of premium atta brands including Hindustan Lever's `Annapurna', AgroTech's `Healthy World', Cargill's `Nature Fresh' and Pillsbury are obtaining their wheat largely from FCI, especially during the lean season after September.
With FCI becoming the sole supplier as well as buyer of grains, the open market and the private trader has almost ceased to exist. Today, the mandi and FCI have become virtually synonymous.
And what is significant is that this wholesale nationalisation of grain markets and marginalisation of the private trader has taken place without any force or conscious design. The Essential Commodities Act has not been imposed in any State over the last 2-3 years, preventing private traders to buy grains or forcing millers to source their grain solely from FCI. FCI's monopoly has been a result of the operation of market forces.
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