The Hindu Business Line : End the price fixation

Foodgrains seem to be back in fashion as far as the Minimum Support Prices are concerned. At first glance, the increase of Rs 65 a quintal, recommended by the Commission for Agricultural Costs and Prices, for Common and Grade-A varieties of paddy for the kharif 2007 season may appear steep, but only if you ignore the bonus of Rs 40 given last year. Bonuses are given under extenuating circumstances and are not intended to be an integral part of the MSP when calculating the support price for the following year. But such technical treatment and interpretation of bonus is for policymakers, government officials, researchers and the like; not for the farmers.

For paddy growers, it is simply that at Rs 645 and Rs 675 a quintal for Common and Grade-A varieties respectively, the MSP will be Rs 25 more than what was assured to them in 2006. According to the Agriculture Ministry, the CACP advises the Government on the price policy of major agricultural commodities to evolve a balanced and integrated price structure in the perspective of the overall needs of the economy as also the interests of producers and consumers. The Commission also recommends non-price measures having implications on overall policy. But the experience of the last one year — tightening supplies, rising open market prices of foodgrains and other essential food products — suggests that supply-side issues are far from adequately addressed. Markets and prices certainly have a role to play as growth drivers, but nothing can substitute efforts to improve the 'real economy, which is agricultural production. Be that as it may, CACP's recommendations are `recommendations'. The Centre decides the MSP after considering inputs from Central ministries, State governments and other stakeholders. Whether the Government will take a view different from the CACP remains to be seen. It must also be borne in mind that a hike in MSP pushes the open market prices so much higher.

Though crops may be competing for acreage based on anticipated returns, as yet this is only at the margins. India is unlikely to witness a major crop shift based merely on the MSP. Yet, the Agriculture Ministry must announce it quickly as pre-monsoon sowing usually takes place by mid-May, and farmers must not be denied this input. In addition to paddy, the MSP for other important kharif crops such as coarse cereals (mainly maize, jowar, bajra), oilseeds (groundnut, soyabean), pulses (arhar/tur, urad, moong), cotton and so on have to be announced. With agriculture growth a tardy 2.2 per cent over the last decade, the time has come for policymakers to think out of the box — that is, beyond the ritualistic MSP — to launch a major national campaign for resurgence on the farm to ensure production and productivity enhancement.

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