Informist, Thursday, Jun 20, 2024
By Afra Abubacker, J. Navya Sruthi, and Pallavi Singhal
MUMBAI/NEW DELHI – Just announcing handsome hikes in minimum support prices for crops without ensuring adequate procurement is ineffective, experts said. Often, market rates fall below minimum support prices, prompting farmers to take cues from mandi prices, rather than government-declared prices.
"Merely declaring MSP will not help. The government should defend MSP by ensuring procurement," B.V. Mehta, executive director of the Solvent Extractors' Association, told Informist. Market rates often fall below the minimum support prices, either due to a glut or lack of demand in the market, he said.
Mehta was commenting on the new minimum support prices announced by the government. On Wednesday, the Cabinet Committee on Economic Affairs increased the minimum support prices of 14 key kharif crops by 1.4-12.7% for the marketing season 2024-25 (Oct-Sep). The highest absolute increase in minimum support prices over the previous year has been declared for oilseeds and pulses, the government said in the release.
Minimum support prices are the rates at which the government buys crops from farmers to stock up state reserves. It also intervenes in the market when rates fall below the minimum support price to prevent distress sale by farmers. However, the government only undertakes procurement operations in a few states and purchases only as per requirement.
Though the support prices allow the state to incentivise certain crop cultivation over others, Mehta says, farmers don't switch crops based on support price signals. "Farmers don't trust MSP and shift between crops. They look at last year's price trend and decide," Mehta added.
However, he sees some marginal switches to tur from soybean in Madhya Pradesh and Maharashtra and groundnut from cotton in Gujarat. "Round the year, groundnut prices have been steady at a higher level. Farmers have noted that," Mehta added. Apart from market rates influencing crop choices, farmers also take up crop rotation to improve soil fertility and yields.
For the key kharif crop, paddy, the government has only given a 5% rise in MSP, much below the market expectation, but largely in line with last year's hike. We expected at least a 250 rupee rise in paddy MSP. Fertiliser prices and labour costs are very high, and a 117-rupee hike would not help the farmers, D. Venkata Ramana, a farmer from Tenali, Andhra Pradesh, said.
The minimum support price of paddy (common) has been increased by 5% to 2,300 rupees per 100 kg and that of paddy (grade A) has been raised by 5% to 2,320 rupees per 100 kg.
Amongst kharif crops, the government undertakes active procurement of paddy. However, farmers pointed out that there are additional expenses when selling to Food Corp of India. "When selling paddy to FCI, it increases our expenses, as we have to dry the grain to meet the body's moisture requirement," Ramana said.
Paddy production has almost stagnated and will not see much of a fluctuation, Rahul Chauhan, director of IGrain India, said. However, he noted that farmers in Punjab's Malwa belt might shift from cotton to paddy as cotton prices were depressed throughout the year.
Though the government has also increased the minimum support price of maize by 6.5% to 2,225 rupees per 100 kg, many states do not undertake procurement operations due to lack of infrastructure. "Currently, there is no procurement in Uttar Pradesh. We need a law that allows the government to buy in the state," Sanjeev Gandhi, Uttar Pradesh-based farm leader, said.
The same is the case with pulses procurement. Though the government has increased MSP for pluses by 1.4-7.9% for the upcoming kharif season, market participants say that procurement by state agencies is tepid. However, experts say that production of pulses, especially tur, will pick up this year as market rates are higher than MSP. The minimum support price of tur has been increased by nearly 8% to 7,550 rupees per 100 kg. Currently, tur at Khamgaon in Maharashtra is sold at 10,500-11,800 rupees per 100 kg. In the case of urad, the government has increased the MSP by 6.5% to 7,400 rupees per 100 kg, and that of moong has been raised by just 1.4% to 8,682 rupees per 100 kg for 2024-25 season.
"Despite high food inflation, a hike in MSP has followed a different pattern and attractive MSPs have been announced," Siraj Hussain, former farm secretary, said in a note. "This could well be attributed to the result of general elections (in rural dominated parliamentary seats) and impending assembly elections in Haryana and Maharashtra," he added.
Though the government annually hikes MSP for kharif and rabi crops, the Commission for Agricultural Costs and Prices points out that the non-MSP assured horticulture, dairy, meat, eggs, and fisheries drive overall growth in Indian agriculture.
In 2023-24 (Apr-Mar), the farm sector registered an eight-year low growth of 1.4%, sharply down from 4.7% the previous year. Patchy rainfall aggravated by El Nino conditions played a spoilsport for farm productivity.
This year, though progress of monsoon over central and northern India has stalled, experts hope agricultural productivity will increase in the upcoming months. India Meteorological Department expects the monsoon to pick up pace in the second half of the Jun-Sep season. End
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