Kharif MSP well-thought out

The government has done well to announce its kharif pricing policy with only moderate increases in the minimum support prices (MSP) of rice and cereals and a fairly good hike in the prices of pulses.  The increase in the MSP for paddy is only 3.7 per cent, or Rs 50 for quintal, while that for pulses has seen a 6 per cent increase, or Rs 250-275 per quintal. Though MSPs were originally conceived as economic support mechanisms to help farmers, they have usually been used as political tools by successive governments. There was likely pressure to increase paddy prices substantially on the ground of crop losses due to unseasonal rains and the possibility of a deficient monsoon. But the government resisted the pressure by going in for only a token hike. It stuck to the recommendations of the Commission for Agricultural Costs and Prices. The major increase in the prices of pulses is well thought out as it will serve a purpose on the price front and might address a glaring imbalance in farm production.

While there is a food grain glut in the country, production of pulses and oil seeds has lagged far behind the demand. India is world’s top importer of pulses. The price of pulses have registered steep increases in the last few months, to the tune of 50 per cent in the case of some varieties, and have had a major negative impact on an otherwise moderating food inflation. Imports are also bound to turn out to be costlier as international prices are high, partly because of expectations of higher Indian demand. The higher MSP for pulses may incentivise farmers to increase cultivation of pulses and reduce the paddy acreage. If production of pulses is more remunerative, farmers are bound to turn to it. Strategic use of MSPs to encourage or disincentivise the production of different crops on the basis of changing requirements has not been tried effectively in the country. There is the need for better crop balance for various reasons. For example, it is necessary to shift from food grain farming in major producing states because of the depletion of water table.

It is necessary to disseminate information about the prices to the farmers. The procurement programme does not work well even in the case of paddy and wheat. It is worse in the case of pulses as most farmers are not even aware of the price support mechanism and there is no effective system for procurement. The higher MSPs will achieve the intended purpose only if the information and procurements problems are also addressed.