With FCI and Statutory Bodies, the Central Government provides price assistance for paddy. Procurement at MSP is open-ended, which means that whichever foodgrains are provided by farmers inside the specified procurement time frame and meet the standard requirements given a prescription by the Government of India are bought at MSP (plus incentives, if any) by Government agencies including FCI for central Pool. In addition to MSP, certain states declare state incentives on wheat and paddy.
MSP processes are carried out by government entities at local wholesale markets, temporary purchase facilities, and related sites. The site and numbers of purchasing centers to be established are determined in conjunction with/by state governments.
Procurement System Established by Government
Customed Milled Rice or CMR is made by milling paddy obtained from the state government/state agencies and the FCI. Paddy is mostly bought by the state government/state agencies in states like Andhra Pradesh, Telangana, Punjab, Haryana, Chhattisgarh, Odisha, Madhya Pradesh, Tamil Nadu, Maharashtra, UP, and Bihar, and the resulting rice is provided to the state government and FCI by rice millers.
The majority of wheat and paddy procurement is handled by state agencies, although FCI handles over 70% of total rice procurement for the Central Pool.
Centralized Procurement System
The acquisition of paddy in the Central Pool is handled directly by FCI or by State Government Agencies under the centralized procurement scheme (SGA). The volume obtained by SGAs is given to FCI for holding and later issued against GOI allocated in the same state or transportation of excess inventories to other states.
FCI reimburses the cost of paddy acquired by state agencies as per the Provisional per cost-sheet published by the GOI as soon as the inventories are handed to FCI.
Decentralized Procurement System
Under the DCP system, the State Government/its agencies acquire, storage, and redistribute paddy and other grains within the state (against the Government of India’s allotment for TPDS & OWS, etc.). Surplus supplies (rice and wheat) obtained by the State/its entities are transferred to FCI in the Central Pool. The State Government’s cost of acquisition, holding, and allocation of DCP supplies is repaid by the Government of India according to the established standards.
MSP, Arhatiya/society commissions, administrative costs, Mandi labor costs, transportation costs, storage & upkeep costs, accrued interest, gunny cost, grinding costs, and statutory taxes are all paid on an as-needed basis. The expense of surplus stocks turned over to FCI is repaid to the State Government/agencies in accordance with the Government of India costs sheet.
So far in the current marketing year 2021-22, the Centre has purchased 741.62 lakh tonnes of paddy at the minimum support price (MSP). The government purchased paddy at an MSP of around Rs. 1,69,133.26 crore during the 2020-21 marketing period.
The government procures mostly paddy and wheat to safeguard producers with MSP and to distribute grains at substantially subsidized rates via ration stores to impoverished people enrolled under the National Food Security Act.