Food Corporation of India to offer fixed costs to arhatiyas (commission agents) for rice procurement in Punjab and Haryana

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The Food Corporation of India (FCI), the largest procurer of farm produce from the APMC mandis, has started a paying a fixed fee for commission agents (arhatiyas) in Punjab and Haryana, for rice purchases during the current kharif season, instead of an MSP-linked fee. The move could deflate the FCI’s procurement cost over the years, and thereby the Centre’s food subsidy bill.

The arhatiya commission for wheat was fixed at Rs 46/quintal, which turned out to be 2.4 per cent of MSP during the rabi procurement season (April-June). The commission for paddy has now been fixed at Rs 45.38/quintal for common variety and Rs 45.88/quintal for grade A, both of which will be 2.4 per cent of their respective MSPs.

Punjab and Haryana together contributed 40 per cent of nearly 91 million tonne of foodgrains procured under MSP across the country in 2019-20 crop year (July-June). 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.

There has been no change in the selling prices since 2013 – wheat at Rs 2/kg and rice Rs 3/kg under the National Food Security Act (NFSA). On the other hand, the economic 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 in the economic costs of wheat and rice is 69-72 per cent, the government has been trying to lower the incidentals to reduce the overall costs. Punjab levies an aggregate tax of 8.5 per cent of the minimum support price at which the FCI and other agencies buy grains.

This includes market fee 3 per cent, rural development cess 3 per cent, arthiya commission 2.5 per cent. Haryana had an aggregate levy of 6.5 per cent (market fee 2 per cent, development cess 2 per cent, arthiya commission 2.5 per cent) until a month ago and it has reduced now to 3.5 per cent (market fee 1 per cent and arthiya commission 2.5 per cent).

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