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Central subsidy through MSP, and the pampered Punjab farmers

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Let’s begin with a set of statements, which are often agreed upon in discussions on wheat production in India.

  1. Punjab produces the most wheat of any state in India, with Haryana a close second
  2. The central government fairly procures wheat from wheat producing states of India: since Punjab produces the most wheat, the central government procures the most wheat from Punjab
  3. The Punjab farmer is not unfairly subsidized by the central government
  4. No other state is paying the price for the center’s pampering of the Punjab farmer

If you agree with any of these statements, this article should be an eye-opener for you.

Let us start with wheat production in India. It comes as a shock to many that Punjab IS NOT the most wheat producing state in India. That honour goes to Uttar Pradesh. Here is the graphic that shows wheat production by state in India.

Indeed, Uttar Pradesh produces almost twice as much wheat as Punjab does. Further, Madhya Pradesh is a close third to Punjab, while Haryana is fourth. Let us look at the numbers in tabular form.

So, as we can see, UP produces close to a third of India’s wheat. Then, there is a cluster of 3 states: Punjab, MP, and Haryana, which follow UP and each produce between 12 and 18% of India’s wheat. Rajasthan follows Haryana closely, with 9%.

Let us come to the second statement. Since the central government is supposed to treat states of India equally, not one unfairly better and another unfairly worse, we might expect that the Food Corporation of India (FCI), which is the arm of the central government that actually does grain procurement, would procure rougly 30% of its wheat from UP, roughly 18% from Punjab, roughly 16% from MP, roughly 11% from Haryana and so on. That would be fair, and expected. Indeed, one would expect that if the center deviated from this, the state that suffered from the deviation would protest, and insist that the center procure its grains more fairly.

Poor states like Bihar and UP might even make the argument that “we are poor, we need central MSP more than rich farmers of Punjab, so please procure more than our share from us. That is more in keeping with the role of the center as an equal distributor of wealth.” It goes even further: MSP procurement is meant for “weaker sections of society” (FCI website). Since there are far more of such sections in states like Uttar Pradesh and Bihar, it makes more sense to actually empower their farmers by purchasing crop from them at a good price. Shouldn’t we be pushing wealth into these poor states at source as well, by procuring grain from them through the FCI at top prices?

But what are the facts? Is the center doing any of the above? It might shock the reader that the center procures roughly 3.5 times the wheat from Punjab that it does from India’s leading producer of wheat Uttar Pradesh! It procures a measly 37 LMT (metric tonnes) from UP, and a whopping 129 LMT from Punjab!

Government of India procurement of wheat at MSP, by state. Source: FCI website (https://fci.gov.in/).

Also, the Punjab farmer is also hugely subsidized as proportion of his produce. In other words, the Punjab farmer sells almost all (roughly 85%) of his wheat to the FCI at MSP, while farmers in other states have to settle for far less of their produce, as percentage of their produce, being acquired by the center. Recently, the Modi government raised MSP procurement price for wheat by Rs. 50 to a quintal, again most of the increased money goes to the farmer of one state. You guessed it: Punjab! You’d think with all this subsidization by the center, the Punjab farmer would be grateful to the center, but showing anger towards “Delhi sarkar” is front and center of the so-called “farmer protest.” Talk about biting the hand that feeds (subsidizes) you.

Furthermore, remember poor Bihar. Procuring wheat from it would be a great way to help the poor farmer of Bihar, don’t you think? And what does our central government procure from Bihar? Almost nothing (0.03LMT). Let’s put this in perspective. Bihar produces roughly a third of the wheat Punjab does, but gets 4300-th the MSP support that Punjab does! This is absolutely shocking.

In summary, Punjab is not the “granary” of India. If anyone should be called that, it is UP. Punjab does not “feed the country”— a boast often heard from Khalistanis. It is the center’s favoritism that allows Punjab to sell so much of its wheat to the government at top price (MSP is roughly 140% of world wheat price for third world countries). The center has no obligation to buy all its wheat from Punjab: it could easily source all of it from other states. And perhaps it should. After all, what is the purpose of this pampering? Let us face it: this is just another sop offered to Punjab to keep the “sensitive border state” at peace.

In other words, the thinking is that if the center gives all manner of subsidies to Punjab, we won’t see another terrorist movement taking off there. But this state of permanent appeasement is harmful to the country, and is grossly unfair to other states who would love to see their grain production to the FCI. It is time to examine why our central government is spending all of its tax payer generated monies on one state. Why not poor Bihar? Why not farmer-suicide plagued Maharashtra and Andhra? Why not most populous Uttar Pradesh that has 6.5 times the population of Punjab? I think we all know why: because there is no risk of a terrorist secessionist movement emerging in Uttar Pradesh, whereas there is a constant threat of such a movement re-igniting in Punjab. In India, wheat procurement is just another arm of appeasement. Is it time to change that?

Endnote: The analysis is similar for the other big MSP procured grain: paddy, and in some ways is far worse; that is to say far more skewed in favor of Punjab. Once more, Punjab is NOT the state producing the most paddy in India—that honour goes to West Bengal. However, Punjab completely dominates MSP procurement of paddy. It suffices to reproduce the statement from the ministry regarding the paddy procurement in November 2020:

“Out of the total purchase of 281.28 lakh tonnes, Punjab alone has contributed 196.13 lakh tonnes which is 69.73 per cent of the total procurement” (!!)

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