Tracking kharif: As crops start arriving, most mandi prices rule below MSPs, may hit rural demand

October 25, 2021 3:45 AM

One of the main demands of agitating farmers is legal guarantee for the minimum support price (MSP) mechanism. The Modi government stepped up MSP procurement of paddy and wheat last year, to pacify the farmers.

After steeply raising the MSPs in the range of 4-52%, on year to fulfil a promise of 50% profit for farmers over the costs of production during kharif 2018, the Centre resorted to moderate increases in subsequent years to curb the food subsidy bill.After steeply raising the MSPs in the range of 4-52%, on year to fulfil a promise of 50% profit for farmers over the costs of production during kharif 2018, the Centre resorted to moderate increases in subsequent years to curb the food subsidy bill.

By Prabhudatta Mishra

Mandi prices of eight out of 10 major monsoon-sown crops are currently ruling below their benchmark rates in leading producing states. This may help government to keep food prices in check even as it threatens to hit rural demand.

The average prices were about 4-34% lower than MSPs in the case of paddy, jowar, bajra, maize, moong, urad, tur and groundnut during October 1-22, according to Agmarknet data. Only soyabean and cotton prices were higher – by 16% and 20%, respectively. The mandi prices of 8 kharif crops (out of 10 major crops) were 4-37% below MSPs during October 2020.

One of the main demands of agitating farmers is legal guarantee for the minimum support price (MSP) mechanism. The Modi government stepped up MSP procurement of paddy and wheat last year, to pacify the farmers.

The Centre, however, pruned the paddy procurement target for the current year to 50 million tonne (in terms of rice), against actual purchases of over 60 million tonne (MT) during 2020-21 marketing year (October-September), which was an all-time high and almost half the total production of the grain in the year. The wheat purchases for the Central Pool was also about 40% of production of 109.5 MT in the last season.

In contrast, out of 61.8 MT of oilseeds and pulses produced during 2020-21 crop year, government procurement was only 2%.

Higher moisture content in the crops due to unduly prolonged monsoon rains have impacted the market prices in many places, traders said. Even though the kharif harvesting season began from October 1, the south-west monsoon is active in many states and is predicted to retreat from the entire country only on October 26 against normal October 15. In fact, the withdrawal of monsoon began from October 6 from the north-west region, against usual September 17.

After steeply raising the MSPs in the range of 4-52%, on year to fulfil a promise of 50% profit for farmers over the costs of production during kharif 2018, the Centre resorted to moderate increases in subsequent years to curb the food subsidy bill. The hike in MSPs was by 1-7%, on year during kharif and by 2-9% for rabi season of 2021-22 crop year (July-June).

Though the Centre in 2018 had launched PM-AASHA, a price support scheme, it did not yield much results in terms of ensuring remunerative prices for farmers as envisaged while fixing the MSP formula. As a robust procurement mechanism for pulses, oilseeds and coarse cereals is absent in most states, the initial trend in mandi prices indicate a repeat of the same situation this year as well. Unless the procurement mechanism improves, the low market prices could hit farmers’ earnings, experts said.

On the other hand, the continuous focus on wheat and paddy procurement has led to huge stocks with the Central Pool. The Commission for Agricultural Costs and Prices (CACP) in a recent report pointed out that government has emerged as the single largest buyer of food grains and driven out private sector from the market after increased production.

“Even as paddy procurement has reached half of the production, it (government) miserably failed to lift farm-gate prices as many states have reported mandi rates ruling 10-20% below MSP this month,” said a former agriculture secretary of Maharashtra.

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