Punjab and Haryana are the only two states where the procurement continues to be wholly routed via APMC mandis. Both the states also maintain much higher level of taxes on agriculture trade, inflating the Centre’s food subsidy outgo.
On October 26, the Union food ministry sent a letter to secretary-food and civil supplies in Punjab government, seeking “information on how and what percentage of the RD (Rural Development) Fee is being spent on improving infrastructure of procurement centres. It also pointed out that, “the RD Fee which is applicable as per the Section 7 of the of RD Act, 1987, of Punjab includes activities other than that mentioned in the PPI (principles for procurement incidentals) dated 24 February, 2020 such as for medical dispensaries etc.”
Punjab’s food minister Bharat Bhushan said that the RDF proceeds — around Rs 1,750 crore in FY20 alone — have been spent on infrastructure of procurement centres. The Centre had asked the Punjab government to put the rural development fee (RDF) collected by the state government from the Food Corporation of India (FCI) for central pool purchases.
Though both the Centre and the state officials have dubbed the food ministry’s latest communiqué as ‘routine,’ a footnote in the provisional cost sheet on paddy procurement for 2020-21 season attached to the letter by union food ministry clearly stated that matters related to deductions from MSP made by the State and utilisation of RDF for the purpose of development of procurement centres is “under scrutiny”.
The Centre’s directive assumed political importance given the context of Shiromani Akali Dal leader Harsimrat Kaur’s resignation from the Narendra Modi Cabinet over the new farm laws, which, the critics say, could undermine the mandi system and MSP procurements.
The agriculture marketing reforms through the two new Bills passed by Parliament will help the Centre reduce the tax burden on it on account of the Food Security Act/PDS, if FCI and other agencies start procuring at the market rates circumventing the mandis.
Prime Minister Narendra Modi has repeatedly said that the MSP system would continue. He has been saying that the farm Bill reforms would enable farmers to be self-sufficient with access to multiple buyers.