An RBI study on paddy crisis in Andhra Pradesh observed that the present structure of procurement is largely responsible for the failure to ensure minimum support price to farmers. It called for change in this system and revising the MSP to make paddy farming remunerative to the farmers.
RBI's Department of Economic and Policy Research conducted the study after disturbing news of crop holiday and huge stocks of paddy lying unsold last year.
“The present procurement structure allows overwhelming procurement of rice from millers and insignificant amount of paddy from farmers. There is a need for a change in the procurement policy of State Government to ensure MSP to farmers,” the 51-page report said.
The study was done by Dr R.V. Ramana Murthy of University of Hyderabad and Dr Rekha Mishra of the RBI.
Paddy farmers in the State have been facing serious crisis of viability for the past few years.
This crisis assumed serious proportions during 2010-11 when there was a bumper harvest.
“On one hand, the cost of cultivation has enormously risen and on the other hand, market prices fell below the minimum support prices,” they said.
Giving reasons for the crisis, the report observed that there was a steep rise in the cost of cultivation in the last three years. The other major problem is pricing. “The market prices are going below the MSP. Even the MSP fixed by the Centre is way below the increased cost of production,” it said.
CACP data gaps
The report found failure of data collected by CACP (Commission of Agricultural Costs and Prices) in capturing the actual costs due to certain methodological problems.
“Consequently, cost projections made by the CACP are way below the actual costs of production. Thus the MSP based on the under-estimated cost of production has seriously affected the returns of farmers in the State,” it felt.