Centre asks states to desist from giving bonuses above MSP

Will procure less foodgrains from states that offer such bonuses

The ministry of agriculture has asked state governments to desist from giving bonuses above the minimum support price of foodgrains.

 

The move comes after Chattishgarh and Madhya Pradesh governments announced a bonus above the MSP. MSP is the price at which the government buys grain from farmers.

 

According to ministry officials at the Centre, such bonus distorts the procurement process and leads to more losses for the Food Corporation of India (FCI), especially at a time when food prices are moderating due to a downside in global food prices.

 

The Centre has said that procurement of food grains will be less in states that offer bonuses above the MSP. 

 

FCI has to pay taxes apart from the MSP and bonus, thereby making losses in the procurement process. This has resulted in higher subsidies for the government. 

 

The ministry of consumer affairs, food and public distribution has also created a committee to recommend ways to restructure FCI  and reduce the functional and cost inefficiencies in the organisation. The eight-member committee is chaired by Shanta Kumar, BJP member of Parliament from Himachal Pradesh, and will have the chief secretaries of Punjab and Chhattisgarh as members. The high level committee will recommend ways to restructure FCI and invite suggestions from public and stakeholders, including private sector firms, on management of food grains.

 

Food Corporation of India (FCI) is the nodal agency for procurement and distribution of food grains and plays a key role in strengthening the public distribution system (PDS). Restructuring FCI will primarily entail separating the procurement, storage and distribution activities of FCI to reduce wastage.

 

It will also suggest measures, within three months, to reorient FCI’s role in minimum support price (MSP) operations and look into efficient storage models, low-cost options of moving grains and upgrading of technology.