Getting prices right was my priority

Written by Sandip Das | Updated: Feb 25 2014, 08:26am hrs
As chairman of the Commission for Agricultural Costs and Prices (CACP) for the last three years, Ashok Gulatis thrust has been to recommend higher hike in minimum support prices (MSPs) for import-intensive oilseeds and pulses, and relatively lower MSP hikes for rice and wheat to curb excess stocks. As Gulati prepares to relinquish his office on Friday, he spoke to FEs Sandip Das on a range of issues impacting Indian agriculture.

With your three-year stint at CACP coming to an end, what do you think are the major achievements of the commission during this period

When I took up this job in March 2011, I knew I had just three years. So, I set out only two goals: get the prices right, and get the markets right. I believe that farmers cannot get the right prices for their produce if markets are strangulated. You may recall that exports of wheat and common rice were banned since September 2007. This type of a restrictive export policy is a hidden instrument of taxing peasantry. So, my first challenge was to fight for opening up exports of wheat and rice. The commission strongly recommended to the government for abolishing export controls on wheat and rice, and cautioned that without this it would end up being in a crisis of plenty. The government finally opened up exports in September 2011 and, consequently, India emerged as the largest exporter of rice in the world. In fact, in FY13, India exported 22 million tonnes (mt) of cereals, and is likely to export 18-20 mt in FY14. This has never happened in Indias history, and it significantly helped farmers get remunerative prices.

For the first time CACP was able to bring out a series of research reports and put it in the public domain which were often critical about the government. What was the purpose of producing such reports, while the commissions job was mainly to recommend MSPs to the government

CACP is also mandated to recommend non-price policies that impinge on agriculture. The idea of research reports (discussion papers) was to give detailed analysis of issues that are behind the recommendations of CACP. In order to encourage a healthy and unbiased debate on critical issues, we thought it would be good to put them on our website. It was a good way to communicate with our stakeholders. I personally feel these discussion papers paid rich dividends.

MSP has been been a touchy issue as it has political implications in many states. How was CACP able to deal with the issue

Policymaking is always within the realm of political economy. Our first and foremost stakeholder is the Indian farmer. The commission made several trips to various corners of the country to understand the problems of farmers in an informal environment in the mandis, in the villages, and also met several chief ministers, state-level principal secretaries, representatives of various ministries at the Centre and finally made our recommendations to the government. And while making recommendations, we always kept in mind our mandate and what our best professional judgement suggested. The Cabinet Committee on Economic Affairs (CCEA), which takes a final decision on price policy, is a representative panel of the people, and we very much respect their decision. It has been a great experience, learning differing viewpoints within the government; not only between the states and the Centre, but also within the various arms of the central government. By sticking to pure professionalism, we were able to weather the political pressures.

Over the last few years, CACP has recommended increase in MSPs for many crops. Yet, at present, prices of groundnut and pulses such as tur and urad are below MSP. What steps the government should take to prevent such a scenario

My biggest concern as of today is groundnut prices. Last year, the market price was above R5,000 per quintal and we recommended MSP of R4,000 per quintal this year. But this year there is a bumper production and market prices collapsed to R3,000-3,500 per quintal. The commission sent three teams to Gujarat, Andhra and Rajasthan to visit several mandis to have first-hand experience of the price crash. We talked to the relevant officials to expedite support operations through NAFED. But the situation remains grim. The pity is that the country still has export controls on groundnut oil in bulk, stocking limits on private trade, and so on. Our recommendation to the government is to put in place an effective procurement machinery for oilseeds and pulses. There is no point in announcing MSPs of 23 commodities when we dont have effective machinery to ensure that support price even for rice and wheat. CACP has already recommended to the government to reduce the number of commodities under MSPs, but do it with effective back up machinery. That will give greater credibility to the government than the current loose system of muddling through.

Despite being part of the agriculture ministry, you have been critical of the National Food Security Act and its implications. How did you manage to carry on with your work despite criticising the government

I have never been critical just for the sake of it. I have always suggested better alternatives, based on best international practices, and which the commission feels would help the government to reduce leakages in PDS, and ensure markets are not distorted, and targeted beneficiaries get their due with minimal costs. l admire the government, which can absorb the criticism. That is the strength of our democracy. As they say, nindak niyare rakhiye, aangan kuti chhavay (keep the critic nearer home). I am happy we played that role.

Would the Food Corporation of India (FCI) be able to meet the challenges of implementing the food security legislation given that the procurement of foodgrains is expected to decline due to various factors including increase in private traders buying grain from the farmers

Frankly, you should ask this question to my colleague, the chairman of FCI. However, our research at CACP shows that FCI is experiencing dis-economies of scale. In simple terms, it means that with increasing procurement, the real cost of handling per unit of grain is rising. That speaks of increasing economic inefficiency, indicating that time has come to think of reorganising it in such a way that its real per unit cost declines. There are several challenges, ranging from acute labour problems and costs to leakages it is a much bigger issue than can be responded in one question. You need to set up a high level committee to look into this and come up with alternative options.

How do you anticipate the future of Indian agriculture sector

Reasonably bright! It will keep feeding increasing population, and also exporting some amount. In FY13, our exports of agri products were roughly $41 billion vis-a-vis imports of $20 billion. We are expecting a bumper harvest this year with foodgrain production touching 263 mt, horticulture 269 mt, milk at 139 mtall are new peaks in a way. Much of the growth in agriculture since FY05 has come from improving price incentives. So, price policy and access to lucrative markets have a critical role to play.

Given that many states have not carried out reforms or enacted their own model APMC Acts, what do you think the states should do to help farmers get a better price for their produce

Farmers should have the freedom to bring their produce to APMC markets or sell it directly to anyone outside the market. The commissions and taxes in APMC markets are too high, and the system is loaded against the farmer. Massive reforms are needed in rationalising commissions, taxes and levies, and also create better infrastructure from grading to storage (preferably through warehouse receipt system).

What steps should the government take so that volatility in tomato and onion prices is tamed

Prices of perishables are always volatile. Price stabilisation needs stocking facilities, freer trade, and more processing. Ultimately, it is food processing that helps stabilise prices of fresh produce. Onion was a classic case last year when its wholesale price went up to R50 per kg and retail touched about R100 per kg, but today the same onion is selling at R5-10 per kg in Maharashtra and R20 per kg or so in the retail market in other parts of the country. The answer is in processing it in dehydrated form, which increases its shelf life to two years, needs one-tenth the space compared to fresh onions, and helps the farmers and consumers alike. But we need to promote this new product to bring it to the consumers plate.