Pricey affair: Why Indian farmers are ‘caught in a maize’

October 31, 2020 5:00 AM

Despite the government’s best efforts, below MSP procurement has ensured that area sown under maize remains low

Ironically, maize production in Maharashtra and Rajasthan has increased—the net sown area was 8.65 lakh hectare in Maharashtra and 9.34 lakh hectare in Rajasthan—despite having lower quality maize than Haryana and Punjab.Ironically, maize production in Maharashtra and Rajasthan has increased—the net sown area was 8.65 lakh hectare in Maharashtra and 9.34 lakh hectare in Rajasthan—despite having lower quality maize than Haryana and Punjab.

By Vishal Dagar & Varun Mahajan

Farmers in the northern states of Punjab and Haryana have been protesting owing to fears of receiving an unsatisfactory price for their produce after the passage of the Agricultural Produce Market Committee (APMC) Amendment Bill in the Parliament. While the governments have been assuring farmers of purchase at MSP, in reality, they have failed to procure at MSP.

Although the government of Haryana promised purchases at MSP for maize, set at Rs 1,850 per quintal, the procurement has been at Rs 800-Rs 1,000 per quintal below the MSP. The Punjab government was no better, as it procured maize at Rs 500 below the MSP. In Rajasthan, the mandi price for maize is Rs 1,200 per quintal, which is Rs 600 lower than the existing MSP.

Although the focus of the government is to encourage farmers to opt for maize sowing as an alternative to paddy in order to reduce reliance on water-guzzling crops—for 1 kg of paddy, 1,500 litres of water is required, whereas 1 kg of maize requires 110 litres—it has not been able to compensate farmers for the switch. The fact that the cost of cultivation for input variables applied for maize is 65% lower than the paddy crop hasn’t helped either.

Due to unattractive cost support (for the cultivation shift from paddy to maize) in India, the net sown area under paddy is increasing rapidly. It increased to 389.81 lakh hectare in 2020-21 from last year’s 354.41 lakh hectare—a 10% increase—meeting the target for the normal sown area under paddy set by the government. On the other hand, maize was sown in 80.03 lakh hectares in 2019-20, a meagre 1.5% increase from last year. Even this year, the government is expecting maize to be sown only in 82.44 lakh hectare.

Such is the state of affairs that the price of loose maize is higher than the mandi price. So, the farmer is selling his product outside the mandi. Maize (corn) loose price (new) at Davanagere market, in Karnataka, was at Rs 1,200-1,320 per quintal. This is also the reason that there is a more-than-3x increase in the sale of maize outside the mandi. In Davanagere market, traders reported uptake of 7,000 bags as on date. In Bihar, despite the export demand from Bangladeshi and Nepalese feed makers, maize is being traded at Rs 1,250-1,275 per quintal (bilty price). Maize is being delivered to Kolkata at Rs 1,450 per quintal. At New Delhi market, Maize (corn) Red (hybrid) is trading at Rs 1,300 per quintal. At Nizamabad market in Telangana, Maize (corn) loose is trading at Rs 1,300 per quintal. Maize (corn) bilty is offered high at Rs 1,375 per quintal.

Though the government provides a further subsidy of 10% on the MSP to poultry farmers to purchase maize, even they prefer purchasing it from the market due to depressed prices. Instead of the Rs 1,620 per quintal offered by the government, Hyderabad poultry feed makers were sourcing maize at Rs 1,500 per quintal from Nizamabad region.

Ironically, maize production in Maharashtra and Rajasthan has increased—the net sown area was 8.65 lakh hectare in Maharashtra and 9.34 lakh hectare in Rajasthan—despite having lower quality maize than Haryana and Punjab. This anomaly arises due to the higher price of maize in these two states.

The demand for maize mostly comes from dairy and poultry farming. While India produces 27 million tonnes of maize every year, it still falls short of meeting the local demand. The local demand for maize in 2018-19 was 35.59 mt. Even though the gap was 8 mt, we could only import 0.3 million tonnes. The rest was met by lower-quality alternatives or by-products of gram. Although this import had jumped by ten times in 2019-20 to 3mt, the price was way higher than India’s MSP at Rs 2,800 per quintal.

India expects to import a higher 5mt this year; it will be paying Rs 3,200 per quintal for imports, at least Rs 1,400 higher than the MSP.

Instead of paying almost double the price for imports, the government needs to increase its production. While providing the MSP to each farmer is, of course, a solution, it also needs to invest more in research and development. The government needs to set up district wise sub-stations as it has done in Hisar, Karnal and Ludhiana. It also needs to set up storage and procurement facilities.

India also needs to relook its production strategy to grow a hybrid variety of maize—baby corn and sweet corn. At present, the demand for baby corn and sweet corn is met from imports. India only has only one core research station producing these varieties. Focus on these will also help increase farmers’ income as the price of this variety is Rs 2,500-3,000.

However, the government will have to set up procurement facilities as an ordinary farmer may not have the wherewithal to process these varieties.

Dagar is visiting faculty (Economics), Amity University, Noida and Mahajan is assistant professor, IIM-Tiruchirappalli

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