Issues with India’s Foodgrain Procurement System

Why in news?

The recent kuruvai season procurement crisis in Tamil Nadu underscores the pressing need to reform procurement mechanisms, incentivize crop diversification, and rationalize food security policies for long-term sustainability.

How does India’s foodgrain procurement system function?

• India's foodgrain procurement system – It is a centralized system managed by the Food Corporation of India (FCI) and state government agencies to ensure food security.
• Purpose – To ensure food security, stabilize food prices, and provide a safety net for farmers by guaranteeing a minimum price for their produce.
• Oversees by – Ministry of Consumer Affairs, Food and Public Distribution.
• Procurement – Grains are purchased from farmers at a Minimum Support Price (MSP) and stored to the Central Pool for distribution under National Food Security Act (NFSA) and other welfare schemes.
  • This process is supported by both Centralized and Decentralized Procurement Systems (DCP).
• Storage and distribution – The FCI manages the storage, transportation, and bulk allocation of foodgrains to states.
• States are then responsible for distributing the grains to beneficiaries through the Public Distribution System (PDS) network of fair price shops.
• Quality standards – Procurement is based on "Fair Average Quality" (FAQ) specifications.

What are the challenges that identified in India’s foodgrain system?

• Overproduction of rice – India consistently produces more rice than required.
  • As of October 2025, rice stocks stood at 356.1 lakh tonnes, over three times the buffer norm of 102.5 lakh tonnes (as per the Union Ministry of Consumer Affairs).
• Procurement-Utilization mismatch – Annual rice procurement (525–547 lakh tonnes) far exceeds PDS offtake (392–427 lakh tonnes), leading to stockpiling and wastage.
• Wheat vs Rice
  • Balanced wheat– Wheat procurement is more balanced, with PDS offtake sometimes exceeding procurement in two of the last three years (except 2024–25).
  • Surplus rice – Rice remains significantly overstocked compared to wheat, as evidenced from the past procurement and offtake under the NFSA and allied schemes.
• High food subsidy – The Union government spends Rs. 2 lakh crore annually on food subsidies, largely due to excessive procurement and storage.
• Import dependence despite domestic potential – While India struggles with excessive rice stocks, it simultaneously bears a heavy financial burden from importing pulses and oilseeds.
  • Pulses – India is the world’s largest producer of pulses (252.4 lakh tonnes in 2024–25), yet imported Rs. 30,000 crore worth in 2023–24.
  • Edible oils – Imports worth Rs. 1.2 lakh crore in 2023–24, covering 55% of demand, despite stagnant domestic oilseed production, approximately 25 million hectares under cultivation.
• MSP-driven paddy monoculture cultivation – Farmers prefer paddy due to assured returns, discouraging diversification.
• PDS leakages – An Indian Council for Research on International Economic Relations (ICRIER) report estimated 28% leakage in rice and wheat distribution, raising concerns about systemic inefficiencies.
• Legacy of liberalized imports – 1990s policy to allow cheap edible oil imports is blamed for stunting domestic oilseed production.
• Institutional inefficiencies – The centralized procurement and distribution lack agility and transparency.
  • For example,Tamil Nadu Civil Supplies Corporation (TNCSC) faced procurement delays and corruption allegations.

What need to be done to enhance India’s foodgrain system?

• Reassess procurement policy – Re-evaluate the sustainability of rice-centric procurement under the guise of food security and consider decentralizing procurement and involving more stakeholders.
• Promote crop diversification – Conduct area-specific market studies and provide financial incentives and extension support to reduce farmer risk in switching crops.
• Rethink export restrictions – The Due to surplus in rice production, the government should permit farmers to export rice without abrupt restrictions, ensuring stable market access and farmer confidence.
• Strengthen farmer institutions – Empower Farmer Producer Organisations (FPOs) to handle procurement, marketing, and supply chains and facilitate direct tie-ups between producers and processors.
• Build institutional capacity – Invest in capacity building for FPOs, self-help groups, and cooperatives and use these institutions to promote soil health awareness, market intelligence, and diversification strategies.
• AI-enabled coordination – Use of technology and AI systems to improve coordination among stakeholders in food procurement and distribution.

What lies ahead?

• Changes in such a complex system cannot happen overnight but a beginning can be made.
• It is time that agriculture experts, farmers, food security specialists, policy makers and planners collectively deliberated on ways to plug the loopholes in the system, if not reform it.

Reference

The Hindu | Time to sort out India’s cereal mess