Why A Technical Proposal By FCI Could Add To Farmers’ Woes

The Food Corporation of India is proposing to introduce tougher quality control standards, according to a copy of the draft recommendations, reviewed by BloombergQuint.

The proposed changes were first reported in the Tribune. While the proposals are yet to be notified, the revision would be the first in many years. They centre around a reduction in moisture content, foreign matter, damaged grains and permitted admixtures of lower class of the crop.

An email and repeated calls to FCI since March 15 went unanswered.

The change could leave some of the produce unacceptable for procurement, said experts, with some raising questions about the timing of the announcement.

The FCI is contemplating procuring wheat with a moisture content of 12% or less, compared to 14% currently. Normally when farmers harvest wheat, it has a moisture content of 13-14%, said Hetal Gandhi, director at CRISIL Research. It can be higher than 14% in crops affected by unseasonal rains and hailstorms, she added.

Historically when there has been an impact on wheat moisture and quality due to unseasonal rains, the government has relaxed quality norms for FCI procurement, Gandhi said. Also, earlier, in case moisture exceeded 14% there was a reduction in price that was offered to farmers as a penalty but the grain was still purchased.

If farmers have to meet the new specification, they may see an additional cost burden. Reducing moisture content may mean more days for sun-drying and the suggested level of foreign matter and damaged grain require mechanical grading, she said.

The impact on paddy too is expected to be similar to wheat.

In its justification for some of the changes, the committee said the proposed standards are already being met because of improved varieties and better agronomic practices for the cultivation of field crops. For some of the other changes, such as cleaning of foreign matter, the committee said the specifications could be met if the cleaning operation is performed properly.

If the FCI follows the norms recommended by the panel, it could also result in lower procurement, said Soham Bhattacharya, a senior research fellow at the Economic Analysis Unit at ISI. It is likely to impact small and marginal farmers more, as they do not possess post-harvest processing infrastructure, he added.

According to Devinder Sharma, food and trade policy analyst, it’s odd to raise procurement requirements set for farmers considering the state of the FCI godowns and the consequent deterioration reported in the quality of grains while stored in the godowns. “Any such move to raise requirements should be preceded by the FCI cleaning up its act first,” he said.

The committee also recommended regulating the indiscriminate use of pesticides by sampling crops at the field level for the toxicity of pesticides used.

Why The Change? Why Now?

Some of the changes, according to the draft, are being introduced to meet international standards for export worthiness. For instance, in the case of wheat, a weight specification has been introduced and a uniform variety is being recommended for rice.

The government may be of the view that these policies were last reviewed in 1995 and much has changed since then, said Gandhi. Additionally, the government wants to ensure that the quality of wheat is in line with international standards for ease of exports, she said.

Sharma, however, said some of the changes could also be driven by a need to reduce procurement given the large stocks held by FCI.

Wheat stocks at FCI godowns were 50% higher compared with the average of the past ten years, while paddy stocks are higher by 11% as per data available till March 2021, according to Gandhi.

The economic cost incurred by the FCI in 2020-21 is estimated at Rs 96,974 crore for wheat. Of that, Rs 16,175 crore was realised in sales while Rs 80,799 was in the form of subsidy. For rice, the economic cost incurred is estimated at Rs 1.56 lakh crore, with Rs 15,385 realised in sales and Rs 1.42 lakh crore of subsidy. The total cost to the FCI comprises the acquisition cost and the distribution cost.

A change in procurement requirements might not immediately impact the farmers as they largely sell their produce to commission agents and APMC mandis, said Bhattacharya. But, if the FCI tightens its requirements, that could mean lower procurements, paving the way for farmers to sell to private players, maybe at lower prices because of the change in quality, Bhattacharya explained.