The cabinet has decided to allow the entry of private players in oilseeds procurement on a pilot basis.
According to the decision taken yesterday, private players can procure oilseeds at the state-mandated Minimum Support Price (MSP) for which they would be paid a ‘service charge’ not exceeding 15 per cent of the notified support price.
The pilot would be held in select places once state governments agree to it. Based on the feedback, it might be expanded.
The proposal for involving private players in the procurement of foodgrains under MSP had been floated some time back. It had a strong backing from the NITI Aayog with its vice chairman Rajiv Kumar supporting the idea several times in the past on record.
However, the idea has been in the works for the last several years, and despite best efforts, the experience so far hasn't been very encouraging.
That apart, encouraging private players to procure commodities other than wheat and rice on behalf of the government has its own challenges, including storing and transportation. The concept itself, though, many say, is not bad, provided the private players fill the hole the states leave out. As such, private sector agencies could, at best, play a supplementary role in procurement alongside Nafed and other agencies.
In the recent past, the first attempt to involve the private sector was made in 2008 when FCI engaged NCMSL (now known as NCML) and NBHC for procurement of paddy in Odisha and some other states.
Thereafter, in 2016-17, the Centre, along with the FCI again, roped in the private sector for procurement of paddy in Eastern India, where the procurement process was weak. This time, it was slightly more structured and modalities were worked out in more detail.
Three private firms, including National Collateral Management Ltd (NCML), were roped in for rice procurement on cluster basis in Uttar Pradesh, Jharkhand, and West Bengal. The other two firms being Veerprabhu Marketing Ltd and Farmers Fortune (India) Pvt Ltd.
Food Minister Ram Vilas Paswan had then said, in a written reply to the Rajya Sabha, that the rules mandated the private companies are bound to furnish daily procurement reports to the FCI, which has the right to inspect purchase centers, storage points and miller premises. The FCI would do the quality checking of rice at the time of acceptance at its depots.
Moreover, these firms have to mandatorily make the MSP payment electronically to farmers within 48 hours of procurement. The FCI will evaluate the performance of private players and impose a commensurate penalty on them for their acts of omissions and commissions.
In UP, the NCML was given a cluster to procure rice from four districts -- Ballia, Mau, Ghazipur and Chandauli.
Veerpradhu Marketing Ltd was awarded an area covering Allahabad, Kausambhi, Pratapgarh and Sultanpur.
Similarly, Farmers Fortune (India) Pvt was given a cluster covering Ambedkarnagar, Basti Sant Kabirnagar and Siddarthnagar. In Jharkhand, the NCML was given two clusters, covering districts -- South Chottanagar and Kolhan.
In West Bengal, Veerprabhu Marketing Ltd was awarded four clusters, covering Bankura, Burdwan, Dinajpur and Siliguri districts.
The success or failure of these experiments is still being evaluated.
Moreover, a bulk of these purchases was for wheat and rice for which FCI and others have adequate storage capacity.
If similar operations are extended to include other commodities like oilseeds, storage could be a big challenge.
Experts say that FCI has built adequate storage capacity for paddy and wheat in all the states except Bihar, Jharkhand, West Bengal and north-eastern states.
However, if other commodities are to be procured at MSP, there will surely be a shortage of space in almost all the states as the storage requirement assessed by the FCI for each district takes into account only the procurement of wheat and paddy.
In fact, a high-powered panel of experts on reforming the FCI, constituted in 2014, had suggested enhancing the role of private sector in storage and transportation of grains and also to supplement FCI's efforts in procurement. But that was only for grains and the current cabinet decision expands it to include oilseeds as well.
Though the government has fixed a minimum service charge of up to 15 per cent of MSP for private players, trade sources said if the charge is less than the cost incurred then very many players won't be interested.
Apart from that, there are also issues with reimbursement of losses in procurement to the private parties.
According to a senior official, losses of Nafed in the procurement of various commodities at MSP under price stabilisation scheme, including pulses, take time to be reimbursed by the government.
MSP operations are likely to result in losses and unless the government assures to bear the losses, the number of private players willing to come forward remains to be seen.