Sanjeeb Mukherjee / New Delhi Sep 25, 2012,
Business Standard
Excess procurement of wheat by government agencies has stirred a demand for intervention by the Competition Commission of India (CCI), on the ground that the state is creating a near-monopoly over the grain trade.
The argument has gained support from the Commission for Agricultural Costs and Prices (CACP) itself, the government’s nodal agency for setting floor prices of farm commodities. In its latest report, on the rabi crop price policy for 2012-2013, it has said this action by the government has made state-owned Food Corporation of India (FCI), the biggest hoarder of wheat in the country.
India’s wheat stocks as on September 1 were estimated at 46.2 million tonnes, about 230 per cent more than the requirement. Overall foodgrain stocks (also comprising rice and coarse cereals) were estimated at 71.9 mt, much more than the required 21.2 mt.
In the 2012-2013 wheat crop marketing season, state agencies had procured 38.1 mt of wheat from farmers till the middle of July, almost 95 per cent of total market arrivals. FCI’s own share in total wheat procurement has been 13-20 per cent in the past five years but in many places, state agencies procure on behalf of it.
The complaint is that this massive procurement, plus inadequate release of stocks in the open market, has created a situation of near-monopoly in the country’s wheat market, leaving very little for private trade. Public monopoly is as bad as private monopoly; hence, CCI should immediately look into the matter, the CACP report had said.
“In Haryana, Uttar Pradesh and Punjab, the government is selling wheat from its inventories at a rate higher than the one in southern India, which goes against the basic economic logic, as commodities in producing areas should be priced lower than in non-producing areas,” said Veena Sharma, secretary of the Roller Flour Mills Federation of India, to Business Standard.
She said the government logic was taxes in Punjab, Haryana and UP were higher than in southern states, raising the cost of purchases. However, with the abnormally high prices, the government was discouraging the growth of value-added industry in the main wheat producing states, she said.
The government, on its part, said it had already allocated around eight mt of wheat for sale in the open market to bulk consumers such as flour millers and biscuit makers, to check rising prices. Of this, around 1.3 mt has been sold and another 1 mt will be sold in the next few weeks.
A senior panel of government officials has also decided to release a minimum 2-2.5 mt of wheat in the open market every month from October, to quell the price rise.
Ramesh Chand, director of the National Centre for Agricultural Economics and Policy Research, however, disagreed with the proposition that the government holding of large quantities of wheat made this a fit case for CCI to investigate. “It’s a free market and anyone who pays more could purchase wheat; in this case, it is the government. Besides, the government can create a monopoly in the public interest,” Chand said.
He said only courts could direct the government to release more wheat in the open market.
India harvested a bumper wheat crop of 93.9 mt in the 2011-12 crop year (July-June).
Business Standard
Excess procurement of wheat by government agencies has stirred a demand for intervention by the Competition Commission of India (CCI), on the ground that the state is creating a near-monopoly over the grain trade.
The argument has gained support from the Commission for Agricultural Costs and Prices (CACP) itself, the government’s nodal agency for setting floor prices of farm commodities. In its latest report, on the rabi crop price policy for 2012-2013, it has said this action by the government has made state-owned Food Corporation of India (FCI), the biggest hoarder of wheat in the country.
India’s wheat stocks as on September 1 were estimated at 46.2 million tonnes, about 230 per cent more than the requirement. Overall foodgrain stocks (also comprising rice and coarse cereals) were estimated at 71.9 mt, much more than the required 21.2 mt.
In the 2012-2013 wheat crop marketing season, state agencies had procured 38.1 mt of wheat from farmers till the middle of July, almost 95 per cent of total market arrivals. FCI’s own share in total wheat procurement has been 13-20 per cent in the past five years but in many places, state agencies procure on behalf of it.
The complaint is that this massive procurement, plus inadequate release of stocks in the open market, has created a situation of near-monopoly in the country’s wheat market, leaving very little for private trade. Public monopoly is as bad as private monopoly; hence, CCI should immediately look into the matter, the CACP report had said.
“In Haryana, Uttar Pradesh and Punjab, the government is selling wheat from its inventories at a rate higher than the one in southern India, which goes against the basic economic logic, as commodities in producing areas should be priced lower than in non-producing areas,” said Veena Sharma, secretary of the Roller Flour Mills Federation of India, to Business Standard.
She said the government logic was taxes in Punjab, Haryana and UP were higher than in southern states, raising the cost of purchases. However, with the abnormally high prices, the government was discouraging the growth of value-added industry in the main wheat producing states, she said.
The government, on its part, said it had already allocated around eight mt of wheat for sale in the open market to bulk consumers such as flour millers and biscuit makers, to check rising prices. Of this, around 1.3 mt has been sold and another 1 mt will be sold in the next few weeks.
A senior panel of government officials has also decided to release a minimum 2-2.5 mt of wheat in the open market every month from October, to quell the price rise.
Ramesh Chand, director of the National Centre for Agricultural Economics and Policy Research, however, disagreed with the proposition that the government holding of large quantities of wheat made this a fit case for CCI to investigate. “It’s a free market and anyone who pays more could purchase wheat; in this case, it is the government. Besides, the government can create a monopoly in the public interest,” Chand said.
He said only courts could direct the government to release more wheat in the open market.
India harvested a bumper wheat crop of 93.9 mt in the 2011-12 crop year (July-June).
No comments:
Post a Comment