Commodities

Who will compensate the ₹17,000-crore income loss of pulse, oilseed growers?

G Chandrashekhar | Updated on May 20, 2020

Due to limited procurement, the growers of these crops have not benefited from MSP

On a conservative estimate, growers of pulses, oilseeds and maize in the just concluded rabi season 2019-20 may have lost a whopping ₹17,000 crore in terms of income. Minimum support price (MSP) has, by and large, remained on paper for these crops. Growers have not benefited from the announcement of MSP, as there has been very limited procurement or price support operation.

The pandemic has attacked our country at an awkward time. March and April are crucial months for marketing of major rabi crops such as wheat, pulses (chana or chickpea) and oilseeds (mainly rapeseed-mustard). Even during normal times, the level of procurement and price support operations have left much to be desired.

Now, with the national lockdown, things have turned really ugly for growers of these crops. The opening of a number of mandis in April has brought limited relief. The farm-gate prices of maize, chana and rapeseed-mustard continue to rule well below the MSP.

Rock-bottom rates

Without price support, farmers have been forced to sell at rock-bottom rates in order to have cash on hand and traders are of course lapping it up. For example, while chana MSP is ₹4,875 a quintal, it is sold at less than ₹4,000 a quintal, which entails a loss of about ₹1,000 per quintal for the grower, equivalent to ₹10,000 a tonne.

In the case of maize and rapeseed-mustard, farm-gate rates are about ₹400 a quintal below the specified MSP of ₹1,760 and ₹4,425, respectively. On a per tonne basis, the loss works out to ₹4,000 a quintal.

The Agriculture Ministry issued the latest crop estimate on May 15, which shows rabi maize harvest at 88 lakh tonnes, rapeseed-mustard at 87 lakh tonnes and chana at 109 lakh tonnes. In the case of chana, even assuming roughly 10 per cent procurement at MSP, growers would stand to lose a whopping ₹10,000 crore — the loss of ₹10,000 per tonne on 100 lakh tonnes. In the case of maize and mustard, a loss of ₹4000 a tonne would roughly translate to about ₹700 crore overall.

Sovereign guarantee

Who will compensate the farmers? MSP is a kind of sovereign guarantee given by the government to the growers. It is like an options contracts where the government makes a commitment that if the crop price falls below the MSP, it will buy from the farmer at MSP. But, in practice, nothing of this sort is happening and that is, in a sense, a breach of contract.

Farmers feel cheated when prices rule far below their expectation and far below the MSP for no fault of theirs. In the absence of procurement, farmers are forced to sell at whatever price they are able to get, which often is low.

Most unfortunately, successive governments have failed to recognise the importance of MSP as a sovereign guarantee and have flouted it with not even a whisper of regret. How long can this continue? New Delhi can no more abdicate its responsibility.

The largest beneficiaries of the procurement and MSP operations of the government are rice and wheat growers in frontline States such as Punjab, Haryana and possibly Uttar Pradesh. They are the most fortunate. Growers in other States and growers of other crops are left high and dry. This is a powder keg that needs to be handled sensitively and doused quickly.

(The writer is a policy commentator and agribusiness specialist. Views are personal)

Published on May 20, 2020

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