Does Public Procurement Benefit Paddy Farmers?

This paper investigates the impact of public procurement on paddy farmers in Bihar. Whether farmers’ access to public procurement agencies led to higher price realisation by them is examined here. The paper used a comprehensive telephonic survey of 1,976 farm households in eastern India (Bihar, eastern Uttar Pradesh, Jharkhand, Odisha, and West Bengal) and employed an endogenous switching regression model to estimate the impact of public procurement on farm harvest price of paddy. The findings reveal that farmers gain by selling to public agencies. However, they are unable to receive the minimum support price.

India’s foodgrain procurement policy aims to ensure a minimum remunerative price to farmers, make staple foodgrains available to the poor at affordable prices, and keep prices in open markets under control through effective market intervention. The government fixes a minimum support price (MSP) for as many as 23 commodities, in principle ensuring their procurement if the open market price falls below the MSP. However, among the 23 commodities, the price policy is effectively implemented only for paddy and wheat procured in large quantities for public distribution and buffer stocking. Even that procurement is not uniform across different states in India, although the central government and state agencies have made concerted efforts to increase procurement nationally.