The Hindu Business Line : Mustard prices crash below MSP

OPEN market prices of mustard have plunged below the Government's minimum support price (MSP) of Rs 1,700 a quintal, following projections of an all-time high crop of 75.89 lakh tonnes (lt) for 2004-05.

Mustard arrivals have already started in Rajasthan, Madhya Pradesh and Gujarat since the second week of February. Daily arrivals in major mandis are currently reckoned in the region of two lakh bags (of 100 kg each), which will rise to 5-6 bags once the crop is harvested after mid-March in other States, including Haryana, Punjab and Uttar Pradesh.

But there is bad news now for farmers, with prices in Kota and other mandis in Rajasthan ruling at Rs 1,425-1,500 a quintal against the official MSP of Rs 1,700 a quintal fixed for the current year's crop. Even in Delhi, prices are being quoted at Rs 1,500-1,650 a quintal.

While the Government has announced that the National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) will procure up to 10 lt this year, its market intervention operations so far have been limited and ineffective.

According to traders, current market realisations on mustard oil and cake makes it virtually impossible to sustain crop purchases at Rs 1,700 a quintal. If one adds various market expenses totalling 7 per cent (2 per cent mandi fee, 1.5 per cent arthiya or commission agent's fee, 2 per cent purchase tax, 0.5 per cent mandi labour and one per cent bardana or packing fee) to the MSP, the effective cost of the crop would be Rs 1,819 per quintal.

If the expenses on transport to the factory (Rs 20) and processing charges (Rs 100) are included, the total cost for the expeller unit will come to Rs 1,939 per quintal.

Each quintal of mustard processed typically yields 37 kg of expeller oil and 62 kg of oilcake, with one per cent provision being made for losses. Currently, oilcake (which contains 7 per cent oil) is fetching about Rs 4.70 a kg, which for 62 kg translates into about Rs 291. If this is deducted from the total cost of mustard for the processor (Rs 1,939), the necessary realisation on expeller oil would be Rs 1,648 on 37 kg or about Rs 44.50 a kg.

As against this, ex-factory prices of mustard oil (expeller) are ruling at just Rs 36 a kg in Rajasthan. Even in Delhi, expeller oil is now selling for just Rs 38.50-39 a kg. "At these rates, only a price of Rs 1,500 a quintal is sustainable," the traders claimed.

Even if Nafed buys rapeseed-mustard at Rs 1,700 a quintal, it would have to dispose of the same at these very prices. Assuming a conservative loss of Rs 200 a quintal on purchases of 10 lt, it would mean incurring losses of around Rs 200 crore, which would, then, have to be made good through Government subvention.

The current year's estimated record crop of 75.89 lt is almost twice the 39.18 lt production registered in 2002-03 and 58.32 lt in 2003-04.

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