Illogical move

The government’s kharif procurement policy, as seen in the steep increase in the minimum support prices (MSPs) of various crops, is not in consonance with the country’s  present economic imperatives and does not address the problems related to stocks, prices and the relative positions of various crops in the national food basket.

MSPs have been hiked from 16  per cent to 53 per cent for a range of crops from paddy to coarse cereals to pulses and oil seeds.

Though support price changes are made on the recommendations of the Agricultural Costs and Prices Commission, the exercise is often  political. Regular annual increases are considered to be in the interest of farmers but very often they go against their interests and against the requirements of the economy.

The hike in the MSP of paddy is an example. The higher procurement price will encourage farmers to increase paddy cultivation and production while the need is to reduce them. The rice buffer stocks are even now unmanageable.

Higher procurement will increase the pressure and lead to more wastage. It will also unnecessarily increase the food subsidy bill when the fiscal situation is bad.

There is  no chance of exports because international prices are softening. The MSP regime should have been used to encourage farmers to shift from paddy, which  requires more water, to other crops.

The support prices of other crops have also been increased but the farmers may stick to paddy because its procurement system is more efficient. Food inflation is already high and the procurement  price increase for a major crop can make it worse. MSPs are meant to provide a safety net to farmers. But once this is assured they can be used to change the cropping patterns to suit the needs of the economy  and even consumption habits. There is huge foreign exchange outgo on account of the import of edible oil and pulses.

The government also decided to reduce subsidies in the case of all fertilisers except urea. This has  given rise to a mismatch between the prices of urea and other fertilizers. The prices of other fertilisers have shot up two or three times in the past two years while the urea price has been stable. This can lead to imbalance in the use of fertilisers and affect soil quality and crop output.