The government may have to shift its focus on procurement from rice and wheat to other crops such as pulses and oilseeds to arrest falling agricultural profitability, an industry watcher said on Tuesday.
“There are a number of crops such as urad, tur, maize, groundnut, soyabean, bajra, rapeseed and mustard whose weighted average mandi prices are trending below the minimum support prices (MSP),” said CRISIL Research Director Hetal Gandhi.
She said the India Meteorological Department’s forecast of a third year of normal monsoon would be a sign of relief and hope for the rural economy. But, bumper production in the last two years has led to a sharp drop in farmer incomes.
“Our assessment indicates that crop profitability has dropped across 9 of 15 States when one assesses 14 key MSP crops covering over 50 per cent of the sown area. We believe the issue lies in not announcing minimum support prices but procuring them,” she said.
These States are Madhya Pradesh, Rajasthan, Andhra Pradesh, Telangana, Gujarat, Bihar, Maharashtra, West Bengal and Chhattisgarh, which account for close to half of India’s gross sown area.
Depressed prices
A key factor for fall in profitability in these States was depressed crop prices especially in pulses and oilseeds. As on February 2018, prices of jute, tur, urad, soyabean, mustard, groundnut, bajra and maize continue to trend below their MSP. Gram too has joined the list since December 2017, she said.
“Higher procurement of rice and wheat and limited bandwidth with government as well as infrastructure issues have restricted benefits to flow for other MSP linked crops,” Gandhi told BusinessLine from Mumbai.
As of now, the only crops that see substantial procurement by the government are rice and wheat. In marketing year 2017, the two crops saw nearly 35 per cent of the produce being procured at MSP accounting for 75 per cent of the total government procurement.
Warehousing space
Despite high overall utilisation of warehousing space at 70-75 per cent in fiscal 2017 ( total agri ambient warehousing capacity is estimated at 125-130 million tonnes), there is significant variation in utilisations across States.
For instance, in Andhra Pradesh and Telegana it is 90-95 per cent, while in Madhya Pradesh, Karnataka and Haryana it is as low as 45-55 per cent.
To minimise this disparity, it is learnt that State governments have been asked to bear the transportation cost to neighbouring States with warehouse space.