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Rice procurement: Fixed fee for arhatiyas seen to cut FCI’s costs

Since the share of MSPs within the financial costs of wheat and rice is 69-72%, the federal government has been attempting to decrease the incidentals to cut back the general costs.

By Prabhudatta Mishra 

The Food Corporation of India (FCI), the biggest procurer of farm produce from the APMC mandis, has began a paying a hard and fast fee for fee brokers (arhatiyas) in Punjab and Haryana, for rice purchases throughout the present kharif season, as a substitute of an MSP-linked fee. The transfer might deflate the FCI’s procurement price over time, and thereby the Centre’s meals subsidy invoice.



Till the final rabi season, when the FCI began paying fee to the arhatiyas in Punjab and Haryana a hard and fast quantity as fee for wheat, the company used to pay 2.5% of the notified minimal assist value (MSP) to them for the 2 important grains.

Even although no notification has been issued on this variation, it’s seen as a significant coverage shift to have long-term affect on the financial costs of foodgrains bought for the Central Pool shares; the present yr’s charges are almost at par with the fee paid earlier.

The arhatiya fee for wheat was fastened at Rs 46/quintal, which turned out to be 2.4% of MSP throughout the rabi procurement season (April-June). The fee for paddy has now been fastened at Rs 45.38/quintal for widespread selection and Rs 45.88/quintal for grade A, each of which will probably be 2.4% of their respective MSPs.

Punjab and Haryana collectively contributed 40% of almost 91 million tonne of foodgrains procured below MSP throughout the nation in 2019-20 crop yr (July-June).

“The decision will have a long term impact if the rate is not increased every year as under the earlier practice the arhatiya’s commission was increasing along with MSP,” mentioned a former head of the FCI. Though state authorities fixes the arhatiya fee, the Centre can at all times inform a state how a lot it (Centre) will pay and there will probably be no tussle since a big amount is procured by the FCI, he mentioned, including most different states have 1% arhatiya fee.

Punjab and Haryana are the one two states the place the procurement continues to be wholly routed through APMC mandis. Both the states additionally keep a lot larger degree of taxes on agriculture commerce, inflating the Centre’s meals subsidy outgo. The meals subsidy is the distinction quantity between promoting costs of rice and wheat by way of ration outlets and their respective financial costs. There has been no change within the promoting costs since 2013 – wheat at Rs 2/kg and rice Rs 3/kg below the National Food Security Act (NFSA). On the opposite hand, the financial costs of rice and wheat for 2020-21 are estimated at Rs 37.27/kg and Rs 26.84/kg, respectively.

Since the share of MSPs within the financial costs of wheat and rice is 69-72%, the federal government has been attempting to decrease the incidentals to cut back the general costs.

Punjab levies an mixture tax of 8.5% of the minimal assist value at which the FCI and different businesses purchase grains. This consists of market fee 3%, rural improvement cess 3%, arthiya fee 2.5%. Haryana had an mixture levy of 6.5% (market fee 2%, improvement cess 2%, arthiya fee 2.5%) till a month in the past and it has decreased now to 3.5% (market fee 1% and arthiya fee 2.5%).

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