Agri Business

Missing: A ‘meaningful deliberation’ on minimum support price for crops

G Chandrashekhar | Updated on June 27, 2018 Published on June 27, 2018

The kharif planting season for 2018-19 started on time in right earnest this year. The South-West monsoon is progressing northward after covering major parts of South India. The weekly progress report of area coverage has begun to flow regularly. The aggregate planted area for kharif season averages 106 million hectares (mha) covering mainly rice, coarse cereals, pulses, oilseeds, cotton and sugarcane. At 11.6 mha as of June 22, area coverage is a little over 10 percent. In the next few days, the monsoon is expected to cover the whole country.

Yet, even as late as June 26 (at the time of writing this commentary), the government has not announced the minimum support price (MSP) for various kharif crops. Whatever the reason, this unconscionable delay is unpardonable and shows the utter lack of seriousness this government attaches to matters relating to agriculture.

In the last Union Budget, a brave promise of a price 50 per cent higher than cost of production was made to growers. Now, serious doubts over the feasibility of the proposal have cropped up, not the least of which is how to calculate the base MSP on which, 50 per cent will be given.

Procurement efforts

Not only this, there are crops such as pulses whose MSP has been hiked sharply in the last two years without incorporating corresponding changes in the trade policy and without policies or programmes to boost domestic demand. As a result, burdensome inventory (domestic plus imported) has accumulated and domestic prices have continued to stay well below the MSP. Procurement efforts have been wholly ineffective. Oilseed prices have been no different, except that soybean rates have moved above the MSP over the last couple of months. Under such depressed price conditions, any hike in MSP — even if nominal — is unlikely to serve any real purpose, except fulfilling an annual ritual. A serious and meaningful deliberation over the MSP regime, its rationale, outcomes desired and comprehensive strategies to achieve the outcomes is missing. This will hardly help the country’s agriculture, which is crying for serious attention in terms of policy support, investment support and research support.

By itself, MSP lost its relevance years ago. It has failed to influence acreage shift or crop rotation and has had no impact on yields. Worse, the government has failed to defend the MSP, which is a sovereign guarantee about crop prices.

While a high MSP without the ability to defend it is proving to be politically embarrassing Given the elevated levels of crude oil in the global market, the price of fertilisers has shot up. Combined with a rapidly weakening rupee, imported fertilisers are pushing up input costs for growers. This needs to be neutralised.

The author is a policy commentator and global agribusiness specialist. Views are personal

Published on June 27, 2018
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