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CAG criticises govt for fixing foodgrain MSPs in skewed way

Last Updated: Tuesday, May 7, 2013 - 18:15

New Delhi: The Comptroller and Auditor General (CAG) on Tuesday pulled up the government for fixing the minimum support price (MSP) of foodgrain crops in a "skewed" manner without following any specific norms.

The CAG also found fault in the way norms were set for maintaining buffer foodgrains for meeting contingencies. It also suggested increasing procurement to meet growing demand.

It said storage capacity owned by state-run FCI was constant during the audit period of 2006-07 to 2011-12. CAG added that this led to a huge rise in hiring charges paid to private godowns.

"While determining the cost of production for each crop, CACP followed a set procedure. No specific norm, however, followed for arriving and fixing of MSP over the cost of production leading to large year-on-year variations," the CAG said in its report on FCI's foodgrains management.

The government announces the MSP for about 20 farm items after taking into account the recommendations of the advisory body Commission for Agricultural Cost and Prices (CACP).

Stating that there is "skewness" in the fixation of MSP based on cost of production, CAG said that the margin of MSP over the cost of production varied widely and no norm had been prescribed for fixing the margin.

The margin of MSP fixed over the cost of production varied widely between 29 percent and 66 percent in the case of wheat and between 14 percent and 60 percent in case of paddy during the period 2006-07 and 2011-12, it said.

"Thus there is a need for greater transparency in the method of arriving at MSP over cost of production," it said.

The CAG report further said that the increase in MSP with resultant increase in statutory charges and non-statutory charges pushed up the acquisition cost of wheat and rice.

Also, there was wide variation in the incidence of statutory charges (mandi charges) and non-statutory charges (transportation cost, labour and others) imposed by states.

The acquisition cost of wheat increased to Rs 1,354.86 per quintal in 2011-12 from Rs 908.42 per quintal in 2006-7, while the cost of rice rose to Rs 1,862.2 per quintal from Rs 1,101.6 per quintal in the same period, it added.

The CAG recommended that the government consider rationalise the cost structure for meaningful reduction in acquisition cost of foodgrains.

FCI is the government's nodal agency for procurement, storage and distribution of foodgrains in the country.

Stating that the average procurement of foodgrains was lower than allocation to PDS and other welfare schemes during the audit period, the CAG said that there is a need for increase in the procurement level of foodgrains.

However, it said that there would be a limited scope for increase in foodgrains procurement unless the arrival of grains at mandi increases from the current level of 45 percent of the country's foodgrains production.


First Published: Tuesday, May 7, 2013 - 18:15
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