aThe discussion on procurement in India will inevitably lead to a comparison between the cooperative-run Amul model and the procurement of cereals and pulses by agricultural marketing societies. Why is it that Amul scores exceptionally well in both stakeholder trust and public trust, while purchases made by FCI and NAFED are often mired in controversy?
Having served as the CEO of a multi-district milk producers cooperative as well as the Managing Director of NAFED, an apex agricultural marketing cooperative, I would like to explain how the two systems differ, but more importantly, What is possible is that the procurement of cereals and pulses has been done to make it as transparent as the milk procurement operations.
got Milk?
Let’s look at the similarities first. The similarity between milk producers and farmers growing cereals and pulses is that both are marginal and small producers. Some of them have physical assets, production surplus and infrastructure to sell their produce freely and directly in the market. Their quantity also makes it difficult for them to add value at the farm gate. Both require the intervention of their cooperative or state agency to get fair and remunerative prices. In fact, on the face of it, there is a great challenge for a milk producer’s cooperative because the product is extremely perishable, while grains and cereals have a longer shelf life.
Perhaps, this aspect of spoilage makes milk producers more disciplined – unless they deliver the milk at the procurement center within the stipulated time, they miss out on the milk van. However, more than that it is the robust system set up by Dr. Verghese Kurien which ensures that there is complete transparency and complete ease of doing business, First of all, the member can enter any quantity – from less than a liter to multiples thereof. After that, it is measured and checked for quality. Although today, fat and solids content are measured on a machine, earlier a lactometer and centrifuge machine were installed in each primary procurement center to record quality. The price of milk per liter was dependent on the quality of the milk and there was a positive incentive for better quality.
However, when it comes to procuring cereals and pulses, let’s understand the complexity. The first issue is their huge quantity due to the seasonality of the production cycle. Second, most of the procurement centers lack grading/sorting machines. Therefore, the decision on whether the product complies with the FAQ (reasonable average quality) norms is based on what the purchasing officer makes on the spot. There is every (human) possibility of perverse encouragement and collusion along with genuine mistake. If the product is less than the FAQ, the stock price drops significantly, and if non-FAQ stock is procured, it will receive a Minimum Support Price (MSP) for which it is otherwise ineligible.
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So it is no surprise that the business of Amul and Milk Producer Societies is growing and becoming more prominent, the procurement functions of FCI and NAFED are always embroiled in controversy. The important point of departure is that while milk collection is done every single day, 365 days a year, procurement operations for cereals and pulses are done once a year and are relevant. Also, unlike Amul, which has dedicated its time, energy and domain expertise to ensure both forward and backward linkages, the same cannot be said for Nafed and state marketing agencies.
Another important factor is liquidity. Metaphorically speaking, milk is a liquid product, the sector is not riddled with liquidity issues, and producers receive their payments on a daily or weekly basis. On the other hand, FCI and NAFED often face cash crunch as they are dependent on a budget line, and even bank guarantees have a certain limit. Thus, even though the payment system has become quite streamlined due to IT interventions, the core problem of lack of resources to make timely payments remains, affecting farmer’s confidence in the system. Perhaps this is the reason why the dominance of middlemen (arthiya) Procurement of cereals and pulses remains as strong as ever.
There is one more lesson to be learned from the milk producing society. Look at the well-established system of strengthening the equity base of the co-operative society at all levels. So, if the milk producer is getting Rs 40/litre as purchase price from the District Milk Union, the primary committee of milk producers will retain a small amount of 25 to 50 paise per liter, for the equity of the society. Over weeks and months, this amount would total to a few thousand, if not a lakh or more, to enable the primary society to build the infrastructure – a state-of-the-art office, a motorcycle for the veterinary sector, for vaccines and medicines. Accessory for storage, or refrigerator. Similarly, the district milk union also keeps a small amount for its equity fund – making the cooperative independent from the government – both in terms of money as well as their internal working.
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higher payouts in the future
Is there a way out? Definitely. Now the time has come for the newly created Ministry of Co-operatives under Amit Shah to bring together a collection of best practices in cooperation in areas other than milk and for their replication in the geographies beyond Gujarat and Maharashtra, where there is a cooperative movement. Quite prominent and strong. India’s rural economy will get the necessary impetus when purchases of the entire range, from oranges in Tamenglong in Manipur and apples in Uttarkashi to raw honey in the Sundarbans, are kept on a flat and transparent keel.
Successful cooperative professionals as well as elected officials can be appointed as professors of practice at regional and district level cooperative training institutes, and farmers should be encouraged to take study trips across the country. The reach of the co-operative sector is wide but has remained as the implementing agencies of many government programmes. There is an expectation that the contacts of some successful societies will be inspirational and meaningful. Second, the Agriculture Infrastructure Fund announced by Prime Minister Narendra Modi and NABARD’s RIDF (Rural Infrastructure Development Fund) should be used to set up a network of grading and sorting machines at all procurement centers so that farmers can get their produce. and classified. It is true that the initial cost of Rs 20 lakh per machine may be high, but it will have many positive repercussions, the most important being the introduction of transparency and fair play in these operations.
Well, we need interventions – both in terms of processes as well as technologies – to achieve equal benefits to primary producers in sectors other than milk and to accelerate a good cycle of economic transformation in the hinterland of India. For.
Sanjeev Chopra is a former IAS officer and Festival Director of Valley of Words. Until recently he was the Director of Lal Bahadur Shastri National Academy of Administration. He tweeted @ChopraSanjeev. Thoughts are personal.
This article is part ofstate of state‘ series that analyzes policy, civil services and governance in India.