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Decentralised Procurement Scheme

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The Scheme of Decentralised procurement (DCP) refers to the manner of procurement of foodgrains to the central (federal) government stock, through the state agencies, rather than through the central (Federal) agency of Food Corporation of India (FCI).

The foodgrains are procured at the Minimum Support Price (MSP) declared by the Central Government for ensuring (a) a cost covering price for the producing farmers and to (b) effect distribution of these foodgrains at affordable prices to the needy and under-privileged through the public distribution system (PDS) of the country so as to ensure food security.


Mechanism of DCP
Under the decentralized procurement scheme (DCP), the State Government itself undertakes direct purchase of paddy and/or wheat on behalf of Government of India. Purchase centres are opened by the State Governments and their agencies as per their requirements. Under this scheme, the State Governments themselves procure grains for the Central pool, store and distribute these  foodgrains for Targeted Public Distribution System (TPDS) and other welfare schemes  (eg mid day meal, supply of foodgrains to Scheduled Cast /tribe/other backward class hostels etc.),  based on the allocation made by the Union or Central Government.

The surplus of foodgrains procured by DCP States, in excess of their requirement is handed over to FCI for the Central Pool stocks and deficit, if any, is met by FCI directly. 

The Central Government undertakes to meet the expenditure incurred by the State Governments on the procurement operations as per approved costing based on certain principles. The Central Government also monitors the quality of foodgrains procured under the scheme and reviews the arrangements made to ensure that procurement operations are carried out smoothly.

State Governments are not mandated to participate in the Scheme but are encouraged. The list of states participating in the DCP Scheme may be seen here[1].

Under Targeted Public Distribution System (TPDS), National Food Security (NFSA) Scheme and Other Welfare Scheme (OWS), foodgrains at subsidized rates are allocated to States/Union Territories by Government of India (referred generally as Union or Central Government) and released to States through Food Corporation of India (FCI). The Food Subsidy against the foodgrains lifted by the State Government from FCI is provided to the FCI directly and not to the State Government. However, in case of those States which have adopted Decentralised Procurement Scheme (DCP), food subsidy is directly released to the State Government for the quantity of food grains distributed by them. Direct Benefit Transfer (DBT) Scheme to provide food subsidy directly to the beneficiaries’ bank account is one of the various methods to check leakages and diversion of foodgrains. However, its implementation is in progress and it depends upon the readiness of States/ Union Territories in terms of digitization and de-duplication of beneficiaries’ database, seeded with bank account numbers and is taken up on specific request from the concerned State Government/ Union Territory.


Background and Objectives
The scheme of Decentralized Procurement of States was introduced by the Central Government in 1997-98. It is aimed at    


Issue of bonus declared by state governments over and above MSP
It was observed that Certain State Governments, which were procuring surplus foodgrains than their requirement for the Targeted Public have also been providing bonus over and above MSP during the past few years. This has been distorting the market and driving away private buyers from the market, leaving the entire responsibility of purchase only on the Government. This has resulted in over procurement in these States.

To curb this anomaly, Central Government has taken a decision that in case, a surplus DCP State declares bonus for wheat or paddy from Kharif Marketing Season 2014-15 and Rabi Marketing Season  2015-16 onwards, the Central Government will limit the procurement for Central pool to the extent of requirement of foodgrains for TPDS/other welfare scheme allocations of that State and will provide acquisition and distribution subsidy to the State Government only accordingly. The State Government will be responsible for the disposal of any surplus quantity procured in the State over and above this quantity and bear the financial burden in that regard.

For non-DCP States, it has been decided that if a State announces bonus over and above MSP, the FCI will not take part in MSP operations in the State concerned and State agencies will have to mobilize resources and take care of entire MSP operations in the State on their own including the arrangements to be made for storage of procured foodgrains. With respect to such States, FCI in consultation with the Department will decide as to how much stock of wheat or rice it should acquire from the concerned State in a particular season and will restrict its Central Pool procurement to that extent, leaving rest of the surplus stocks to be disposed off by the State Government at its own risk and cost.


Open Ended procurement of Foodgrains
Under this, FCI is obligated to buy all the grains that farmers offer to sell at the prescribed procurement price (MSP+bonus) as long as the grains meet a certain quality standard .So the government will buy at MSP from any farmer who comes forward to sell (even if the market prices are running higher than MSP)

1. The 15 State Governments  undertaking decentralized procurement as on July 2015 are West Bengal (paddy/ rice), Madhya Pradesh (paddy/ rice and wheat), Chhattisgarh (paddy/ rice), Uttarakhand (paddy/ rice and wheat), Andaman & Nicobar Islands (paddy/ rice), Odisha (paddy/ rice), Tamil Nadu (paddy/ rice), Gujarat (wheat), Karnataka (paddy rice), Kerala (paddy/ rice), Andhra Pradesh (paddy/ rice in 6 Districts), Bihar (paddy/ rice and wheat), Rajasthan (wheat in Alwar District only), Punjab (wheat for NFSA obligations only) and Telangana (paddy/ rice in 9 Districts).

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