The Hindu Business Line : Steep hike in support price for kharif crops

Mumbai, Sept 11 The Government has announced the minimum support prices (MSP) for various crops of kharif 2008 season, a recent event that went largely unnoticed.

The Agriculture Ministry simply uploaded the information on its Web site last week.

Lacking fanfare

There was no fanfare and no pious statements of support to farmers that usually mark such announcements.

Indeed, if anything, the MSP decision on several crops such as cotton, oilseeds and pulses has been taken rather late in the season.

Harvest of crops is only weeks away; and there is no way farmers will draw any benefit from the announcement at this point of time in the crop growth cycle.

Yet, there is a huge political statement the Government has made, without actually announcing. There is an unprecedented increase in the MSP of most crops that are harvested in the kharif season.

There is a 35.5-52.5 per cent price hike in case of coarse cereals; 29.3-48.2 per cent in case of pulses; and 35.5-94.0 per cent in case of oilseeds.

Boost to cotton

Cotton got a boost too with hikes of 38.9-47.8 per cent for designated varieties.

The steep hike in MSP for kharif 2008 crops comes in continuation of a big hike for wheat (33.3 per cent) earlier this year and paddy (30.4-31.8 per cent) for the next season.

Production costs have increased sharply with higher market prices of inputs such as fertilisers.

While the revised MSP should bring cheer to growers, its effect on market prices and inflation cannot be understated.

Whether industry and trade – buyers of crops – have the capacity to absorb these prices is debatable.

Absorption capacity

The processing industry is sure to pass on high raw material costs to consumers.

The latters’ absorption capacity – barring a small size of well-to-do sections – is limited.

Poor agricultural performance of recent years and high open market prices of food and other essentials has eroded the purchasing power of rural India.

What shape the market price play takes in the coming months and whether it will deliver political dividends remain to be seen.