APMC alternative: Is Odisha model of decentralised procurement ideal?

Sanjeeb Mukherjee looks at how the Odisha model of decentralised procurement has a few key advantages, but certain challenges, too

Farmers in several parts of India are fiercely protesting the three new farm Acts and the common complaint is: As the pieces of legislation come into play, mandis will gradually wither away, having a direct impact on the minimum support price (MSP)-based procurement mechanism.

But, there are ample examples to show how states that don't have a well-entrenched procurement system managed to boost their purchases in the last few years.

No doubt, a robust mandi system is the cornerstone of a strong procurement as shown by Punjab and Haryana over the years. But there are alternatives, too.

States 3 such as Madhya Pradesh, Chhattisgarh, and Odisha — have shown while the network of mandis does have its advantages, it is not always a pre-requisite for improved procurement at MSP.

In the decentralised mechanism, the state government undertakes direct purchase of paddy or rice and wheat, and also stores and distributes foodgrain under the Food Security Act and other welfare schemes. The Centre meets the expenditure incurred by the state on procurement. It also monitors the quality of foodgrain and reviews the arrangements made to ensure that procurement operations are carried smoothly.

In a paper published in the Economic and Political Weekly in 2012, Mekhala Krishnamurthy, associate professor of Sociology at Ashoka University, said Madhya Pradesh and Chhattisgarh emerged as major regional players on the wheat and paddy procurement landscapes over the years by buying through state agencies and marketing societies across mandis. This, on one hand, ensured high rates for farmers and, on the other, lowered PDS prices.

Odisha is another example of how steady growth in procurement can be sustained on a decentralised basis without relying on the complex web of traditional mandis, middlemen, and commission agents.  The commission is paid to primary agriculture cooperative societies (PACS) and others for the procurement. 

The Paddy Procurement Automation System (PPAS) of Odisha, many experts said, is a model which shows how decentralised procurement can be carried on in a transparent manner without the interference of middlemen.

Around 2,606 PACS spread across 314 blocks, along with a network of women-led self-help groups (SHGs), do the bulk of paddy procurement in the state. Around 680 market yards or collection centres are also involved.

In the 2019-20 kharif and rabi seasons, the data shows SHGs accounted for around 3 per cent of paddy procured by state agencies; PACS facilitated a majority of the rest.

The keystone of this process is a highly automated system of farmer registration, which is matched with land records and then multiplied with the average yield of the area to come up with a fair idea of the amount of surplus paddy that each farmer can sell to the state agency.

The sale takes place at a designated time supervised by officials of the state civil supplies corporation who also ensure that millers accept paddy in their presence.

Earlier, PACS used to avail loans from cooperative banks to make MSP payments to farmers, but in the last few years, this has been automated to ensure farmers don’t have to rely on cooperative societies to get their payment.

As soon as paddy gets accepted by the miller, the payment process gets triggered in a centralised database and MSP gets credited into the bank account of the farmer within a certain period.

“It’s a process of decentralised procurement but centralised payment method,” said Pradyut Dash, associate vice president- solutions at CSM Technologies, the agency handling the backhand of this system.

He said in the past few years, even share-coppers and those who have authorised someone to look after their land can sell their paddy through the system. In the case of share-croppers, they need 'a consent letter' from the landlord; for a nominee, he/she needs a nomination letter.

The Odisha model

• 1.47 million registered farmers
• 7.08 million acre of verified land
• 10.53 mt paddy surplus
• 1,347 millers, 280 certified transport contractors
• 2,606 PACS
• 50,000+ villages, 12,378 fair price shops.

 Source: Odisha Government

Dash said when the system was introduced in 2012-13, around 0.7 million farmers had registered; the number has now risen to over 1.47 million. 

“The percentage of people who have registered and people who have actually sold their paddy is growing over the years as farmers see value in the system and appreciate its transparency,” Dash said.  In 2005-06, Odisha procured around 3.2 million tonne (mt) of paddy; this rose to over 6.5 mt by 2018-19.

But, every system has its flaws. The PPAS has come under criticism in the last few years. One big criticism by several western Odisha farmers has been that because of the centralised system of yield determination, growth in production isn’t adequately taken care of, leaving them with large unsold paddy surplus.

“In the last few years, Odisha has witnessed good paddy output because of good rainfall, narrowing the gap between the average yield in irrigated and unirrigated areas. But the average yield determination for procurement hasn’t kept pace,” said Surendranath Pashupalak, former vice-chancellor of Odisha University of Agriculture and Technology. He said the average yield determination for assessing the marketable surplus needs to change.

Saroj Mohanty, a farmer leader, believes Odisha’s procurement model cannot be compared with that of Punjab and Haryana as the state never had a robust mandi mechanism.

“In Odisha, mandis don’t have proper infrastructure and lack even basic facilities. Their number is also less… Also, PACS do procure from market yards but the only difference is there is no tax and arthiyas,” Mohanty said.