Calls for urgent reforms in procurement of foodgrains

The high price of domestic and global food has lead to calls for urgent reform in the procurement of foodgrains such as wheat and rice.

The recent floods in Queensland and Sri Lanka, coupled with export bans in countries such as Russia are ensuring a pincer-like movement in demand and supply globally.

Such movement necessitates a relook at some domestic practices that continue to build upward pressure on food prices.  

However, unwinding a problem that has accumulated over many decades is not easy. For example, the rates of taxation on market produce in Punjab and Haryana range from 8-12.5% on the value of the produce.

This is taxation on a scale that funds the expenditure of these governments. Making them back down is not an economic problem but a political one. These taxes ensure that large private companies, which can reap scale economies and bring efficiency to trade, are simply not interested in entering the market.

Then there is the issue of world governments “laying its hands” on as much grain as possible for the public distribution system and food security measures.

Given these overarching issues and problems, there needs to be a significant changes in the procurement of foodgrains to ensure that a stop is put to this frightening upward trend in prices.

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