The government’s MSP operations in foodgrain and to a lesser extent in pulses have been at a big cost to the exchequer but rarely has it come to procure vegetables from farmers in a big way.
The government’s minimum support price (MSP) operations in foodgrain and to a lesser extent in pulses have been at a big cost to the exchequer but rarely has it come to procure vegetables from farmers in a big way. To quell violet protests by farmers over a crash in onion prices, the Madhya Pradesh government has purchased the vegetable at a scale unprecedented in the country and is now staring at a massive loss of Rs 900 crore.
While 8.76 lakh tonne of onion have been purchased by Madhya Pradesh State Cooperative Marketing Federation (MARKFED) at an attractive MSP of Rs 8 per kg over the last five weeks, it is now forced to sell the commodity at Rs 2 per kg via the public distribution system. While onion stocks have begun to rot, even the open auctions conducted by MP Civil Supplies Corporation have fetched just Rs 2-3 per kg.
“Usually farmers keep around 25% of their produce for the months of August and September the when supplies situation tightens, but because of high price (MSP) offered to farmers this year, they have sold their entire stocks to the state agency,” a state government official told FE. Clearly, such a high level of state purchases of the vegetable is unsustainable, he said.
Even some farmers and traders of neighbouring Maharashtra and Gujarat had sold their onion to Madhya Pradesh to fetch a better price. Last year, MARKFED for the first time intervened in the onion market and purchased around 1 lakh tonnes of onion at Rs 6 per kg from farmers.
Sources said the high MSP offered this year would lead to farmers bringing more areas under onion next year as well, creating a sort of a vicious cycle.
What compounded the problems for the state agencies was that after adding transportation and storage costs, the prices of onion procured from the farmers became Rs 12-13 per kg, a price which private traders in Madhya Pradesh and other states found unaffordable.
Although the state government had no plan to procure onions earlier this year, chief minister Shivraj Singh Chouhan decided to purchase onions from farmers following the farmers’ protest, which began on June 1. The farmers protests took a violent turn on June 6, when five persons were killed in police firing at Mandsaur.
A MARKFED officials said that there was glut in prices because of a bumper output 3.4 million tonnes this year which lead to mandis across Madhya Pradesh being flooded with onions. The mandi prices in many key growing districts of Malwa regions such as Dewas, Mandsaur, Indore dropped to Rs 1 per kg in early June.