1. Procurement, storage, marketing & distribution of staple foods (Rice & Wheat) in India: some issues, challenges & suggestions Prof. P.G. Chengappa & Dr. A.V.Manjunatha ADRTC, Institute for Social and Economic Change, Bangalore Competition Reforms in Key Markets for Enhancing Social and Economic Welfare in Developing Countries (CREW project) Presentation prepared for CREW Opening Meeting (India) on 28 May, 2013, New Delhi

2. 2 Outline Procurement of rice & wheat Storage of rice & wheat Marketing & distribution of rice & wheat

3. 3 Competition policy reforms in Agricultural Markets Measuring the benefits of competition policy reforms in agriculture markets is really difficult - Nature of commodities - Complexity of supply chain - Interlocked markets - Government Intervention

4. 4 Agricultural markets & competition act Markets are a key factor in influencing success/failure of efforts to improve the welfare of producers & consumers Agricultural markets in India are characterised by market imperfections. Competition Act 2002 of Competition Commission of India

5. 5 Procurment of Rice & Wheat Govt fixes the MSP- CACP, state/central ministries, some other relevant factors Note: # figures in the brackets indicate % increase Trade distorting- high taxes, market fees, commission,state cess Need to rationalize trade distorting factors atleast for staple foods Un-restricted integrated national market Minimum Support Price (MSP)

6. 6 MSP policy has been very effective in surplus producing states like Punjab and Andhra Pradesh, It has not been so effective in the deficit states (TN, Bihar, Kar, Assam, WB). In Punjab, the effective implementation of the price policy has helped in improving the production and productivity of rice. Effectiveness of MSP Policy for Paddy in India (Ali et al., 2012)

7. 7 First, complete decentralization of govt. rice & wheat procurement & distribution Second, decentralization + 10 & 20% real reduction in MSP Third, decentralisation + shift to use deficiency payments Indian wheat & rice sector policies and the implications of reform (USDA, 2007)

8. 8 Production, procurement, offtake,stock of rice & wheat Obj. of food managment: procurement and distribution of food grains, & maintainence of buffer stock for food security & price stability The excessive stocks is posing problems of storage and hence, private trade is essential to reduce excessive burden of stock & subsidies

9. 9 Production, procurement, cost & price of rice & wheat (2011-12) DFPD makes allocation of foodgrains for 6.52 crore(BPL) & 2.43 crore(AAY)

10. 10 Procurement & distribution: some more findings from literature The govt. procurement, distribution are reported to have negative impact on private foodgrain marketing,discouraging modernisation of marketing resulting into losses & inefficiencies (World Bank, 2000) Uncertainties about procurement & open market sales, in some cases result in hoarding by private trade (Jha & Nagarajan, 1998)

11. 11 Reforms in warehousing Construction of godowns under Private Entrepreneurs Guarantee (PEG) scheme of FCI Warehousing development and Regulatory Authority Under Grameena Bhandar Yojana farmers are supported to have storage structures. Due to excessive procurement of foodgrains, more public-private partnership for establishing storage godowns is necessary.

12. 12 Agricultural Marketing: Rice & Wheat Marketed surplus: 75% (rice) & 70%(wheat) Huge variations in density of markets => 103 kms- punjab to 11215 kms in Meghalaya Wide variations of market fee=> 0.5 to 2% Commission charges paid to CA=> 1 to 2.5% (food grains) Higher marketing costs & lower price realization by the farmers in regulated markets This has resulted into fragmented supply chains with large intermediations PH losses in cereals(ICAR,2000):3.9 to 6%

13. 13 Emerging marketing channels, market information, infrastructure Apni Mandi (Punjab), Kisan Mandi(Rajasthan), Hadaspur vegetable market, Rythu Bazaar(A.P), etc. Contract farming – rice & wheat..?? Electronic mode of marketing of rice & wheat Forward trading & future markets Market information using ICTs: http://agmarknet.nic (300 commodities, 2000 varieties, > 1800 markets), Organizations(Nokia, Reuters, etc.) disseminating price information via SMS & voice based system.

14. 14 Market reforms & initiatives Reforms in APMC act of 2003  While selection of states for the current study, the above information need to considered..!

15. THANK YOU