MSP won't help, need robust farm insurance policy: ICRIER

The best way for the government to help farmers is to strengthen the insurance system. He says merely raising minimum support price (MSP) will not be enough. MSP is the price fixed by Government of India to protect farmers against a steep fall in their crop price. If the market price for the crop falls below MSP, government agencies purchase it from them farmers at the announced minimum price.

Below is the verbatim transcript of Ashok Gulati and LS Rathore’s interview with Latha Venkatesh, Sonia Shenoy and Guest Editor, Ridham Desai on CNBC-TV18.

Latha: The monsoon guidance is 93 percent but yet it hits the Kerala coast on 30 th. Is there any optimism with the monsoon hitting on time; you want to revise that 93? Is there an upward bias now at all to your guidance?

Rathore: At this stage, we are not revising. We are going to revise on the first week of June based on the data which we receive by the end of May. And that is our second revision during that time we also give special distribution as well as temporal distribution month wise. But as of now, we are not going to revise and this onset date over Kerala as you rightly mentioned. If it is on time or just before nick of onset, our normal date, it definitely has a positive impact because good start is always better.

Latha: Any update on the spread? I mean has the El Nino situation got worse because that is what apparently some Australian bureau guided; any more details that you can give us in terms of the spread or the intensity, the danger that can be wrought by El Nino?

Rathore: El Nino is not the only factor that is what we are impressing time and again. And whatever El Nino can cause negative impact has already been factored into because the Pacific Ocean conditions are also factored into our forecast process. So, to that extent, the seen percent deficiency which has been reflected has accounted for this kind of El Nino situation.

Sonia: It will be another season of weak monsoons and we have seen farmers suffer for two or three consecutive seasons now. What is your own estimate of how much this could impact food prices?

Gulati: Food prices, depending upon the news what happens to production and we have already seen that ’14-’15 production is down by 5.5 percent in terms of food grains. I am not really too much worried on the case for rice or wheat prices although they are also now looking a little better. The real brunt will be on pulses, on oil seeds, on fruits and vegetables; that is where the worry could be. But all said and done, El Nino and this impact on drought, what we worked out from 1980 onwards, we saw that there were about 12 years of El Nino but only seven resulted, six of them, El Nino years resulted in droughts. There were total seven droughts from ’80 to ’14-’15. So, almost all droughts, I would say, 95 percent have occurred in El Nino years, but all El Nino years not necessarily to lead to droughts. So, that we have to keep in mind. And I hope things work out better this year.

Ridham: Another factor that impacts food production is the level of water. How do you judge that because we have had a couple of years of averagish monsoon, in fact below par? So, do you think water levels have been depleted and that could hurt production more this year?

Gulati: If you have a, Maharashtra would be a classic case, where the water in the dams are already at a very precarious level and there would be even issues of drinking water in parts of Maharashtra, maybe even Rajasthan, Gujarat. The western belt suffers the most during this period and therefore the first advisory that has to go from the ministry is do not go for water heavy crops. Try to save water. Unfortunately if you look at sugarcane is still standing tall in terms of taking all the water. The production of sugarcane did not come down even in ’14-’15 because of whatever policies on pricing and other things that we have. So, we are not trying to save water and spread it to other crops so that life saving irrigation can be given to lighter crops. It is a perverse situation. So, I would suggest that get away from sugarcane. Already there is excess production of sugar and go for light irrigation crops and pulses and oil seeds.