Falling producer prices of food crops and milk have emerged as a major political issue over the last year. While the Centre has awarded generous increases in support prices in the case of cereals and pulses, the Maharashtra government has acceded to the protesting dairy growers’ demand to buy milk at ₹25 a litre. But higher support prices lead to the opposite outcomes if they are not backed up by procurement and additional demand. Hence, a total pulses procurement of over four million tonnes in 2017-18 could not arrest a fall in prices to well below the support price level, since that amounted to less than a fifth of pulses output. In contrast, wheat and paddy prices for farmers hold firm because procurement accounts for a third of the output. In a country where malnutrition is still rampant, it would be a mistake to view falling producer prices as a ‘glut’. The net per capita daily availability of foodgrains (which include cereals and pulses) has only now crossed the 500-gm mark. In the case of milk, the per capita daily availability of over 350 gm is just a little more than the dietary recommendation of the Indian Council of Medical Research at 300 gm. When the inequalities in food intake across income groups — particularly in the case of vegetables, fruit, milk and eggs — are taken into consideration, it is clear that the population can absorb a higher output of food, eggs and milk. The issue, then, is of sorting out market limitations through a range of steps.
The procurement and public distribution system need to be strengthened and streamlined. An efficient PDS opens up additional demand, addresses nutritional deficiencies and above all helps stabilise the market by removing a part of the produce. Applying the same logic to milk, it is high time that States, apart from Karnataka, introduced milk and its products in mid-day meals, and in railway stations at cheap rates as some Central ministers have advocated recently. Public kitchens, which have begun in the southern States, should be promoted elsewhere. It is notable that producer prices for milk have held relatively firm in Karnataka, a significant producer, despite a spurt in output in recent years. Retail milk prices in Karnataka are lower than in most parts of the country.
Producers can also be assured of support through the price deficiency payments scheme. Unlike procurement, it will not run foul of the WTO. However, implementation issues have come to the fore. The experience of the US and EU points to a high budgetary outgo. Finally, Indian agriculture needs a distribution system that can cope with much higher levels of output.