Mandi prices rule below their minimum support prices as rabi arrivals peak

April 5, 2021 4:30 AM

While wheat prices may firm up once the official procurement begins in all the producing states, the government will have to implement a robust procurement system for other crops to support the prices fetched by farmers.

Since the new farm laws are stayed by the Supreme Court, purchases by private players have been hit too.

By Prabhudatta Mishra

Mandi prices of most rabi crops ruled below their minimum support prices (MSPs) during the last month, even as more than half of the winter crop has been harvested (see chart). While wheat prices may firm up once the official procurement begins in all the producing states, the government will have to implement a robust procurement system for other crops to support the prices fetched by farmers. Farm-gate prices normally tend to come down when arrivals gain momentum.

Since the new farm laws are stayed by the Supreme Court, purchases by private players have been hit too.

According to an FE analysis of mandi prices across the country, only mustard and masur were sold above their MSPs at 9% and 2%, respectively, during March. The weighted average mandi prices of mustard and masur crops were 10% and 1%, respectively, above MSPs in Rajasthan and Madhya Pradesh, the two largest producers.

Wheat prices in Madhya Pradesh, which has seen the highest arrivals among all states, ruled at Rs 1,824/quintal (7.6% below MSP) on March 31, while the rate was around Rs 1,660/quintal in Uttar Pradesh, the largest producer of the crop. Similarly, chana prices were Rs 4,695/quintal (8% below MSP) in Madhya Pradesh and Rs 4,702/quintal in Maharashtra. Barley prices were Rs 1,362/quintal (15% below MSP) in Rajasthan and Rs 1,302/quintal in Madhya Pradesh.

“Mustard prices started rising from December due to the firming up of edible oil prices globally. There is a need to ask Nafed to step up its procurement activities as the arrivals will increase manifold this month with farmers preferring to sell their winter-sown crops during April and May to prepare for the kharif sowing,” said Vikas Goyal, a trader in Jaipur, Rajasthan.

Amid the ongoing farmers’ protest against the three contentious farm laws, Haryana has made elaborate arrangements with Nafed and the Food Corporation of India (FCI) for purchases of mustard and wheat at MSP, according to state’s deputy chief minister Dushyant Chautala. Farmers have been registered through an online portal created for the procurement and payment will be transferred to their bank accounts, replacing an earlier practice of routing the payment through Arhatiyas (commission agents).

On the other hand, the Punjab government is yet to have a mechanism for direct transfer of payment to bank accounts of farmers, including the lessee farmers and sharecroppers. However, the state government wants continuation of the earlier practice of payment via arhatiyas as per its Agricultural Produce Market Committee (APMC) Act even for the wheat procurement for the Central Pool. Wheat procurement will commence from April 10 in Punjab.

“We started preparations to buy earlier as wheat normally starts arriving in Madhya Pradesh mandis from the first week of March. We have decided to pay slightly higher than the nearest mandi rate at our purchase centre at the village,” said Sanjeev Prajapati, an executive with a private agri-business company, operating in a few districts for the first time in the state. He said even though the farm law allowing freedom to farmers to sell anywhere has been stayed, his company has the licence (issued by the state government) to buy directly from farmers. “If market rates go up once official procurement at MSP starts, we will still buy at the mandi rate,” Prajapati said.

For the 2020-21 crop year (July-June), MSPs of rabi crops were raised by 2-6% from the previous year. The Budget allocation of PM-Aasha scheme for procurement of oilseeds and pulses has been reduced by 20% to `400 crore for FY22 from the budget estimate for FY21.

Meanwhile, 31% of the wheat area has been harvested until March 31, while it is 95% in case of mustard and masur, 83% in chana and 44% in barley, according to agriculture ministry data.

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