A few days ago, the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI), Government of India published its report number 587 titled “Situation Assessment of Agricultural Households and Land and Livestock Holdings of Households in Rural India” (abbreviated as SAS). The report summarises the main findings and provides some detailed tables on the data from the 77th round of national sample surveys, which was a sample survey conducted across rural India with the agricultural year 2018-19 as the reference year. This is the third in the series of such surveys. These are arguably the only available large-scale data source that provide data on crop incomes and on a range of variables for agricultural households in India. What does the recent SAS tell us about the procurement system in India?

Let us take the case of rough rice (paddy) during the kharif season 2018-19 (July – December 2018). Rice was the most important crop grown during the kharif season across India. Around 53 per cent of 93 million agricultural households in India reported production of rice in this season. Among the households that produced rice, around half reported selling a part of their produce. Within these households, three-fourths made their major sale of produce in the local markets. Around 16 per cent made their major sale of produce to Agricultural Produce Market Committee (APMC) mandis, cooperatives, and government agencies. The remaining, around 9 per cent, made their major sale to input dealers, farmer producer organisations (FPOs), private processors, contract farming agencies, and others. If all sales (that is, not just the major sale) of rough rice in the kharif season is considered, 14.5 per cent of the households that reported the sale of rough rice accessed various procurement agencies such as APMC mandis, government agencies, and certain cooperatives that functioned as procurement agencies. In terms of quantity, 23.7 per cent of total output produced in the kharif season was sold to procurement agencies, that is under the minimum support price (MSP) arrangement. In other words, only a limited number of farmers accessed procurement agencies for rice in kharif 2018-19, a feature also applicable to other crops and for rice in rabi (January – June 2019) season as reported in this article. This raises two questions: (1) are farmers opting for markets over procurement agencies? and (2) is the picture uniform across India?

Why do farmers depend on markets? 

A few hints to answer the question why farmers depend on markets for selling their produce are provided in the SAS report. First, only about 41 per cent of farmers who sell rough rice were aware of the MSP in the kharif season 2018-19. If the awareness of procurement agencies under MSP is taken, then this proportion falls further to 30 per cent. Secondly, various factors hinder farmers from accessing procurement agencies even if they are aware of its operations. While 14.5 per cent sold their produce to procurement agencies as indicated earlier, the remaining (nearly 16 per cent) found that either procurement agencies or local purchasers were not available under MSP (4 per cent) or had specific reasons (10 per cent) clubbed under the category of “other” in the report for not selling rough rice to procurement agencies. Finally, the key variable here is “received better price over MSP.” Only 0.5 per cent of farmers sold their produce in markets because the price offered to them was better than the MSP.

These numbers show us that the population who had an option to sell either in a procurement agency or in a market was small in the first place. Among these households who truly had a choice between markets and procurement agencies, only a few farmers found the price offered by markets attractive than the price offered by procurement agencies. In sum, the low number of farmers accessing procurement agencies is not a reflection of deliberate choice made by farmers rather it reflects a lack of choice for them. This fact underlines the need for strengthening and extending the MSP and procurement operations across India, a demand raised consistently by farmer organisations and acknowledged by the Government in the past.

Diversity of procurement operations 

The average values at an all-India level mask significant regional variations within India. The interactive chart below brings out this diversity in detail. It displays the States of India by the share of total produce sold under MSP (sold to any procurement agency) on the x-axis and the average sale value received by farmers on the y-axis. Each bubble represents a State. The chart has to be read as follows: Haryana lies on the right side and above Bihar, indicating that a greater share of output produced in Haryana is sold to procurement agencies and the average value of these sales is higher than in Bihar.

There are several useful details here. First, among five north-eastern States (Assam, Manipur, Mizoram, Nagaland, and Sikkim) and union territories no farmer has accessed procurement agencies (that is the share of output sold to procurement agencies in these places is zero). Secondly, 16 States, including the five States mentioned earlier, have less than 10 per cent of rough rice sold under MSP. This includes big States such as Bihar and Uttar Pradesh, which together accounted for more than 30 per cent of all farmers reporting sale of rice during kharif 2018-19. Thirdly, there are six States where MSP sales account for between 10 per cent and 25 per cent of the total output. Finally, six States had a higher share of output sold to procurement agencies than the national average (23.7 per cent). These States are Punjab, Telangana, Madhya Pradesh, Odisha, Kerala, and Chhattisgarh, ranging from 30 per cent of total output in Punjab to nearly 85 per cent of total output in Chhattisgarh.

The average sale value reported for rough rice by farmers who sold their produce to procurement agencies ranged from Rs 14.2 per kg in Gujarat to Rs 25 per kg in Kerala. The MSP announced by the Central Government for 2018-19 kharif season was Rs 17.5 per kg. Different procurement agencies and States offer prices above or below this rate to farmers on various grounds. However, the Report does not acknowledge these differences. In terms of deviation of the price received by farmers from the MSP, it is interesting to note the case of Chhattisgarh and Kerala, which are clear outliers in the graph. These two States provided State-specific bonuses above the MSP announced at the Central level in 2018-19: Rs 7.5 per kg in Chhattisgarh and Rs 7.8 per kg in Kerala. It is noteworthy that these two States provided a higher price than the central MSP and covered a larger share of produce under MSP compared to the all-India scenario.

These findings are not new. A recent article by Prankur Gupta, Reetika Khera, and Sudha Narayanan in the Review of Agrarian Studies has shown with the evidence prior to the recent SAS data that the procurement operations for rice and wheat have expanded to newer regions within India over the last two decades. They also argued that the low share of overall procurement does not mean that small and marginal farmers are excluded by the procurement system. The SAS collects data on size class of operational and ownership holdings. A careful examination of the unit-level data from the SAS, where further disaggregation of data is possible across social groups and size class of land holdings, would help us learn more about the variation in procurement and MSP by these groups for 2018-19.

Note: Another article by Biplab Sarkar in the Review of Agrarian Studies compares the previous two rounds of surveys, highlighting the issues in methodologies employed in the surveys and juxtaposing this data source with the globally recognised standards of collecting data on crop incomes.