MCX arm in spot over rider

The food ministry wants private procurement agencies to have five-year business record.

Private agencies looking to procure foodgrains on behalf of the government will now be able to do so only if they have an experience of five years in agriculture-related business, according to a recent policy formed by the food ministry.

This prevents companies promoted by mainline commodity exchanges for the purpose of procurement and other allied activities from procurement services.

Companies such as the National Bulk Handling Corporation (NBHC), an arm of the Multi Commodity Exchange, had procured paddy on behalf of the Food Corporation of India (FCI) last year.

"We have taken up this issue with the government as well as the FCI and hope that the policy would be suitably modified," said Anil K Choudhary, managing director, NBHC.

"The proposal for involvement of any agency in addition to FCI and state government agencies in central pool's procurement should be considered only in those states where the infrastructure for procurement is weak," said a food ministry official.

Further, the state government will need to supervise the procurement operations so that the company does not buy foodgrains from farmers at rates below the government-offered minimum support price (MSP). The FCI will also have to ensure that the cost of procurement by the private company is lower than that of its own or the state government agency, whichever is lower. The company should have at least 100 employees on its rolls and should have a minimum paid-up capital of Rs 5 crore as on March 31 of the previous year.

Any proposals for involving private agencies in procurement on behalf of FCI need to be considered by it as per the new policy guidelines.

However, the FCI is not satisfied with the new guidelines laid down.

"We need to develop more and more new agencies to outsource our procurement activities. Our workforce has come down from 80,000 in the mid-90s to 41,000 and by 2012 we will have only 15,000 people left and we need to work with private agencies. We have formally written to food ministry to reconsider these guidelines", said Alok Sinha, chairman and managing director of FCI.