Agri Business

‘Adopt price deficiency scheme to ensure remunerative returns to farmers’

Our Commodities Desk Chennai | Updated on July 07, 2021

Niti Aayog member Ramesh Chand says MSP affecting user industries’ competitiveness

The Centre should adopt the price deficiency scheme to ensure remunerative payments to farmers for their produce, especially wheat, than the minimum support price (MSP) scheme, the government think-tank Niti Aayog member Prof Ramesh Chand has said.

The current MSP system is distortionary since it affects the competitiveness of the user industry such as bakeries and bread manufacturers in the wheat sector, Chand said, inaugurating three-day ninth International Wheat Seminar virtually.

Under the price deficiency scheme, farmers will be compensated the difference between the MSP fixed for a particular crop and its market prices. The Madhya Pradesh government had adopted this payment method under the Bhavantar Bhugtan Yojana till March 2018.

MSP higher than C2 costs

Stating that the current wheat MSP of ₹1,975 a quintal is 50 per higher than the C2 costs (all cultivation costs and family labour besides the rent on the land), he said it was 106 per cent more than the A2 plus FSL costs (all cultivation costs incurred by a grower besides the value of family labour).

“There is no problem even if farmers are given 200 per cent of the cultivation costs as returns – and I support such payments –but let us sell the produce at the open market price since the MSP is distortionary,” he said, stressing the need for ensuring remunerative returns to farmers through the price deficiency scheme.

Price spread

Urging the wheat products industry to make exports competitive, especially bakery items, he pointed out that in the current Agricultural Produce Marketing Committee (APMC) set up, there was a huge price spread between what farmers get and what consumers pay.

“The price spread is such that pulses that fetch farmers ₹6,000 a quintal are sold at nearly ₹105 kg in retail outlets. If there is a proper supply chain from farmers to retail, the price spread could be 30-40 per cent lower,” Chand said.

Discounting the view that wheat was water-intensive, the Niti Aayog member said that it was one of the most water-efficient crops that need a lower amount of irrigation compared with rice. “Wheat is being blamed for the ills of rice. Six or seven rounds of irrigation are done by farmers because they get free power. Normally, 2-3 rounds of irrigation would be enough,” he said.

Chand said wheat was also a highly nutritious crop with the average level of protein being 10.5 per cent compared with 7.16 of ragi, 9-9.7 per cent of jowar and 9.9 per cent of rice. “Bajra protein level is slightly higher and again ragi has higher calcium content,” he said.

The Niti Aayog member said that biofortification of wheat was the way to go, while the wheat industry should look at promoting more branded products. He said wheat had good scope for increased consumption since Indians spent only Rs 1 out of Rs 100 for wheat products other than flour. Also, 88 per cent of the expenses on wheat was on milled flour and the rest on the value-added products.

Siraj Chaudhary, Managing Director and Chief Executive Officer of NCMSL, said the future of wheat need to be looked at differently with increased importance to storage and movement. He also said that lack of volatility in wheat did not attract the trade and this issue needs to be addressed

Chaudhary also called for investments in the processing sector so that the industry would be ready to tap export opportunities.

S Sivakumar, Group Head, Agri-Business, ITC Ltd, in his address, said that Centre’s concept of one nation one price to sell wheat through the open market sale scheme affected returns to farmers. He also termed MSP as distortionary.

Sridevi Annapurna Singh, Director, CSIR-CFTRI, said academic institutions are ready to join hands with the industry to do research on new products.

Published on July 06, 2021

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