The Hindu Business Line : Going beyond MSP

MORE THAN HALF way into the kharif season, the Centre has announced the minimum support price for various crops. In recent years, despite the professed stand of providing primacy to agriculture, it was usually the policy-makers' indifference to the needs of the farming sector that prevented the announcement of the MSP well before the planting. This year, however, the general elections until early-May and the `code of conduct' came in the way. Whatever the reason, yet another season is lost. For many years now, we have consistently failed to use the MSP policy to send price signals to growers and encourage much-needed crop shifts. Be that as it may, the redeeming feature of the decision of the Cabinet Committee on Economic Affairs is the attempt to reduce the extent of price distortion between fine cereals, on the one hand, and crops in short supply, such as oilseeds and pulses, on the other.

A nominal hike in the MSP for paddy (Rs 10 per quintal) as opposed to a substantial increase for oilseeds (Rs 100/quintal for groundnut in-shell; Rs 90 for sunflowerseed and Rs 60-70 for soyabean) is in line with the recommendation of the Commission for Agricultural Costs and Prices which has been pushing for narrowing the price gap between grains and oilseeds/pulses. The Government could have used the opportunity to further fine-tune foodgrain management by restricting procurement to only one type of paddy, that is, the common grade. Hopefully, this will be done the next season. Pulses and coarse cereals surely deserve enhanced support than what the Government has proposed. Importantly, by itself, the steep hike in the MSP is unlikely to do any wonders for oilseeds production. If anything, a Rs 15,000-a-tonne MSP for groundnut in-shell would convert to an oil price of Rs 45,000 a tonne or Rs 45 a kg. Would this Government — so concerned about rising food prices and inflation — be comfortable with high prices of the most popular cooking oil?

The MSP, obviously, is a double-edged weapon that has to be deployed carefully such that the interests — often conflicting — of growers (high farmgate prices) and consumers (low/reasonable retail prices) are harmoniously balanced. While growers have to be assured of remunerative returns, whether the market can bear the hike is an issue that has never been debated with any seriousness. Also, annual MSP increases unrelated to international conditions — the Indian agri-commodity market is gradually going global — means domestic prices would often be out of sync with international rates, blunting our export competitiveness. Thus, under extant conditions, higher MSP by itself may deliver little tangible benefits to stakeholders, unless accompanied by a comprehensive policy to strengthen delivery of key inputs, management of water, facilitation of marketing, and setting up of rural infrastructure. In the case of coarse cereals, pulses and oilseeds, the extremely low yield is an important issue that needs to be addressed. Yield-enhancement strategies call for large investment and long-term focussed commitment. Over time, sustained high yields can actually lead to a reduction in the MSP from the current high levels.

More Stories on : Editorial | Agricultural Policy

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Going beyond MSP

Is China worth emulating?

Yearning for authentic governance

Inflation is all gas

Forex market intervention for transition economies

Fund of funds for efficient asset allocation

New sovereigntism

Pakistan plots return of Taliban

PF rate