Rabi MSPs reflect govt’s intent to reduce procurement burden

By: |
September 09, 2021 3:15 AM

In the case of wheat, the key winter cereal, the new MSP will be Rs 2,015/quintal, up Rs 40 or just 2% over last year. This is a lower increase compared to several immediate past years.

Of course, all MSPs are in keeping with the principle of these prices being at least 150% of the production cost (A2+FL).

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved rather modest 2-9% increases in the minimum support prices (MSPs) of crops to be grown during the rabi season starting from October 1. The expectations of a bumper winter crop have brightened, given the forecast of abundant rains this month, which might lead to improved soil moisture conditions.

The increase will ensure remunerative prices to the growers for their produce while the prices have been fixed with the aim to encourage crop diversification, the agriculture ministry said in a statement.

The highest increase in MSP over the previous year has been decided for lentil (masur) and mustard (7.8% and 8.6% respectively or Rs 400/quintal each). In case of safflower, an increase of Rs 114/quintal or 2.1% from last year has been announced. The differential remuneration is aimed at encouraging crop diversification, the ministry said.

In the case of wheat, the key winter cereal, the new MSP will be Rs 2,015/quintal, up Rs 40 or just 2% over last year. This is a lower increase compared to several immediate past years.

This is significant since the government is grappled with higher production of the grain and consequent pressure on procurement. The country had record 109.5 million tonne (MT) of wheat production during 2020-21 (July-June). This year’s target is set at 110 MT.

Of course, all MSPs are in keeping with the principle of these prices being at least 150% of the production cost (A2+FL).

“Concerted efforts were made over the last few years to realign the MSPs in favour of oilseeds, pulses and coarse cereals to encourage farmers shift to larger area under these crops and adopt best technologies and farm practices, to correct demand-supply imbalance,” the ministry said. The rabi MSP announcement for 2021-22 crop year has been further advanced by two weeks from previous year.

India Meteorological Department (IMD) has already predicted above-normal rains for September, quantitatively 115% of the long-period average (LPA). So far, the rainfall was 115% of LPA in September and further wet spell in next one week as predicted may be helpful for rabi crops as sowing is set to commence from next month.

MSPs of rabi crops are declared usually announced in October or November, but last year it was announced a month earlier on September 21, probably to re-assure farmers about the government’s commitment on continuing the system of benchmark price system amid the farmers’ protests against the contentious farm laws.

Robust production doesn’t necessarily boost farmers’ earnings and farm-gate price is one of the major factors to boost the gross value added (GVA) in agriculture. In the case of many crops, including oilseeds and pulses, the procurement levels are crucial to influence the mandi prices, unless there is a decline in production.

The Centre has spent over Rs 85,000 crore for procuring record 43.3 MT of wheat grown during 2020-21 crop year and this is 11% higher than its previous year. Every year the procurement has been increasing while the annual demand of wheat under the National Food Security Act (NFSA) is 25-30 MT. The Central Pool had 56.5 MT of wheat as on August 1, more than double of buffer norm of 27.6 MT for July-September.

The price support scheme sans procurement doesn’t seem to be working on the ground. Although the government purchases have increased in last five years compared to previous five years, the benefits of MSPs are limited mostly to paddy, wheat farmers in Punjab, Haryana and Madhya Pradesh. For the first time last year, the FCI had purchased sizable quantity of paddy in Telangana and Andhra Pradesh. During 2020-21, the Centre had procured nearly 1.2 MT of pulses and oilseeds, which is less than 2% of their combined output of 61.8 MT. In contrast, paddy and wheat procurement was 48% and 40%, respectively against production.

As per official data, the agriculture and allied sector remained one of the brightest spots in FY21, with 3.6% growth in gross value added (GVA) in real term even on a relatively unfavourable base (the farm sector GVA grew as much as 4.3% in FY20). The positive trend continues as this sector remained largely insulated from the Covid shocks and grew as much as 4.5% in Q1FY22, against 3.5% a year before.

Do you know What is India expected to grow 10 pc during current fiscal: NCAER Director General Poonam Gupt,FinMin releases Rs 9,871 cr grant to 17 state, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Finance Ministry may seek rating upgrade from Moody’s during September 28 meeting
2Trying to ease rules to make it easier for units to exit SEZs: Goyal
3Indian economy has bottomed out; formal sector may get back to pre-Covid level by this year-end: Montek Singh Ahluwalia