New Delhi: Thousands of farmers, agitated by agrarian laws that threaten their livelihood, have intensified their protest by blocking highways and camping on the Delhi border.
Leaders of the government and protesting farmers’ unions, led by Prime Minister Narendra Modi, have held several rounds of talks but made no progress in breaking the law passed by parliament in September.
Though various farmers’ unions have supported the protests, the movement is mostly led by growers from Punjab and Haryana.
Every year the government spends billions of dollars to buy millions of tons of rice and wheat from Punjab and Haryana, and the world’s most expensive food-buying program has now been the focus of India’s biggest farmers’ protest for years.
How does India run its massive food procurement program?
After calculating farm costs, the state announces minimum support prices (MSP) for more than 22 commodities annually to set the Agricultural Cost and Price Commission (CACP) standard.
Although the CACP declares MSPs for most crops every year, the state’s leading grain procurement firm Food Corporation of India (FCI) buys only rice and wheat at those prices due to lack of storage and money.
After buying rice and wheat from farmers at MSPs, FCI sells staples to the poor at a higher subsidy rate. The FCI compensates the government for its losses.
Does the State Procurement Program LED for Rice and Weight Production?
The guaranteed prices offered by the FCI encourage farmers to produce large quantities of rice and wheat. Overproduction puts pressure on the FCI to buy additional supplies from farmers, resulting in state warehouses overflowing and the ballooning subsidy bill increasing the budget deficit.
Despite sitting on huge mounds of rice and wheat, the annual rise in FSI MSPs and its own storage costs make it challenging to export FCI’s rice and wheat more expensive than world prices, and make overseas sales economical.
Shortly thereafter, the Government of India offers small quantities of rice and wheat to other countries through diplomatic agreements. Still, FCI’s warehouses are chock-a-block.
Who benefits the most from FCI’s secure network?
The safety net, ironically, includes farmers from the northern states of Punjab and Haryana, forcing poor associates of Bihar and other underdeveloped states to sell at a discount.
Every year, farmers in Punjab and Haryana sell their entire products to the FCI in MSPs, thanks to well-developed market yards and efficient buying centers, which are far from the undeveloped grain buying infrastructure of Bihar.
Also, unlike the poor farmers of Bihar, the rich and politically influential farming community of Punjab and Haryana, FCI continues to buy large quantities of rice and wheat from their states, where agriculture is the main basis.
While Punjab and Haryana sell their entire rice and wheat production to FCI, the collection of government agency in Bihar is less than 2% of the state’s total production.
Most farmers in Bihar who are out of the safety net are forced to sell at a 25% to 35% discount.
Bihar farmers, who are already deprived of guaranteed income, have not clearly opposed the new laws, which will enable Punjab and Haryana growers to finally stop buying FCI’s at guaranteed prices and leave private buyers at their mercy.

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