The Hindu Business Line : Cabinet rejects statutory status to CACP

New Delhi, Jan. 15 The Centre has rejected the proposal to accord statutory status to the Commission for Agricultural Costs and Prices (CACP) while also extending its mandate to provide advice on tariff policy and other trade-related matters.

The Cabinet Committee on Economic Affairs (CCEA), which met here on Thursday, did not accept the recommendation by an Expert Committee under Prof Y.K. Alagh to confer statutory status to the CACP.

The proposal, had it gone through, would have made it mandatory for the Centre to fix the minimum support prices (MSP) for various crops at levels recommended by the CACP. The underlying idea here was to insulate fixation of MSPs from political pressures and subject these, instead, to rational economic principles.

But the Expert Committee’s suggestion was rejected by the Cabinet, ostensibly at the instance of the Union Agriculture Ministry. The latter held that the CACP recommends MSPs well before the start of the cropping season, whereas the crop gets harvested much later.

‘No flexibility’

If the Centre was bound by the MSPs recommended by the CACP, there would be no flexibility to respond to changing market conditions and fix procurement prices accordingly. In such a situation, it was felt that the CACP’s present status as a purely ‘recommendatory body’ be maintained, official sources told Business Line.

The CCEA also rejected the Expert Committee’s proposal to extend the CACP’s terms of reference so as to include, “To advice from time to time on the tariff structure and other measures relating to imports and exports of agricultural commodities and their processed products”.

This would, in effect, have made it mandatory for the Centre to consider the CACP’s views regarding increases or decreases in import tariffs for any agri-commodity and measures to restrict or ban export/import of particular products.

“The opposition in this case came mainly from the Commerce Ministry, which expressed reservations on any role for the CACP to advice on trade and tariff matters, so as to integrate these with MSP policy,” the sources said.

“The Commerce people felt the CACP cannot be authorised to advice on what the tariff levels for individual commodities should be, so as to maintain the MSPs recommended by it. This may result in trade distortions which go against the basic economic principles of free trade,” they pointed out.

The Commerce Ministry, on the contrary, held that the CACP incorporate a member representing the Ministry. This would, in turn, ensure that the CACP would recommend MSPs and related actions that “do not come in conflict with broad trade objectives” and “are compatible with the World Trade Organisation and other bilateral and multilateral arrangements,” the sources added.

The CCEA also rejected the Expert Committee’s suggestion to expand the coverage of MSP and the official cost of Cultivation Scheme to horticulture crops, i.e. fruits and vegetables.

Methodological issues

The Prof Alagh-headed Committee was constituted by the Agriculture Ministry on May 7, 2003 to study various methodological issues in fixing MSPs of crops. Its terms of reference also included examining the existing mandate of the CACP and whether or not to reposition its role so as to provide greater teeth to its recommendations.

The Committee submitted its report on May 31, 2005, which was then forwarded to other Ministries (Finance, Commerce, Food, Planning Commission) for seeking their views before being placed for the Union Cabinet’s consideration.