Webinar :Register now for webinar on 'Trade BankNifty in just 15 minutes a day' - By Asmita Patel
you are here: HomeNewsIndia
Last Updated : Oct 28, 2020 01:52 PM IST | Source: Moneycontrol.com

Explained | What Kerala’s move to fix floor price for vegetables means for consumers and farmers

What impact will the action have on consumers, what does it mean for a state that is dependent on outside produce, how will the scheme be implemented, and other key questions answered

Subramani Mancombu

On Monday, Kerala chief minister Pinarayi Vijayan said his state has fixed floor price for vegetables that would be 20 percent above production and will come into effect from November 1.

The floor prices will be fixed online for 16 varieties of vegetables produced in the southern state and if market prices dropped below the floor price, the vegetables will be procured at floor prices from the farmers.

More importantly, there will be a quality gradation of vegetables, which will see a revision of the floor prices regularly. The local bodies will play a crucial role in implementing the scheme as they will coordinate the procurement and distribution of vegetables.

Close

Farmers who cultivate vegetables up to 15 acres a season will benefit. They will have to register besides insuring the crop. The scheme additionally envisages setting up an entire supply chain process such as cold storage facilities and refrigerated vehicles for transporting the produce.

Why the scheme was launched

What are the benefits and fallout of the scheme? Has the scheme been announced only because elections to the Kerala Legislative Assembly are just six months away? How far can the scheme be implemented? These are the questions that are being asked.

The announcement, per se, seems to be a political decision for two reasons. One, State Assembly elections are near and thus the LDF wants to be in the good books of the peasants and rural people.

Two, it is also a way of opposing the Union Government’s agricultural reforms enacted in Parliament during the Monsoon session.

The reforms, enacted through three Acts, allow farmers to sell their produce to buyers of their choice, enter contract farming and not worry over the stock limits fixed for various commodities. The Centre has, however, brought back stock limit on onion after the commodity’s prices surged to Rs 100 a kg at retail outlets.

Opposition parties, especially the Congress and the Left Democratic Front, have been critical of the reform Acts, saying they were pushed through in a hurry. The Left parties, including the Communist Party of India-Marxist (CPI-M), have been demanding support price for more crops cultivated by farmers.

Thus, the Kerala Left Democratic Front (LDF) government’s scheme is in line with this position.

What the scheme means for consumers

For the ordinary consumer, at least in Kerala, he/she should now expect to pay a higher price for locally grown vegetables if the scheme proves to be a success. Since the State government intends to buy vegetables that rule lower than floor price, it remains to be seen if the consumer will have to pay for it or he/she will enjoy the fruits of the lower market price.

But will the state ensure that no illegal transactions like the grain procurement in Punjab will take place? How will it tackle the issue of cheaper vegetables coming from other states?

Probably, the Kerala government can take a leaf out of the Madhya Pradesh government’s Bhavantar Bhugtan Yojana, wherein the Shivraj Singh Chouhan paid the difference between the minimum support price of a crop and a lower market price.

Under this scheme, farmers were paid the difference if they showed the receipt after selling their produce. The Kerala government can look at such a scheme rather than burden the consumer for the fall in the price of the vegetable in the market and prevent other States' produce in local markets.

Where the scheme comes up short

There are some drawbacks with the scheme.

First, the Kerala government hasn’t said how the scheme will be made mandatory. How will the law be framed to implement the scheme?

Two, how will the floor price of the vegetables be arrived at? Has any committee been formed to decide the floor price? How frequently will the prices be revised?

Generally, there is a practice of including the land value in the cost price in Kerala, especially for commercial crops. Will the practice continue to fix the floor price for the vegetable?

More than a decade ago, bowing to the pressure of the natural rubber lobby, a benchmark price was fixed for the commodity. However, prices ruled lower in view of poor demand and lower crude oil prices.

Then, the Kerala government came up with a scheme during Congress chief minister Oommen Chandy’s regime to pay an additional Rs 5 a kg for rubber procured. But hardly 50,000 tonnes of natural rubber was procured under the scheme.

According to N Radhakrishnan, a rubber dealer and former president of Cochin Rubber Merchants Association, even recently when rubber prices ruled around Rs 100-120 a kg, Kerala government offered Rs 30 a kg as compensation to the growers. “Not many people came forward to avail of it as the process for registering it was cumbersome. You have to produce many documents,” Radhakrishnan said.

What the scheme means for farmers

Will the process of registering for the scheme be as cumbersome as the one for the rubber payment? That might discourage growers. However, the scheme is expected to encourage growers, who have reportedly doubled vegetable production in the last four-and-a-half years.

A state government press release, announcing the floor price scheme, put the vegetable production in the state at 14.72 lakh tonnes. This is far lower than the 30 lakh tonnes it needs annually.

Five years ago, there were protests against vegetables coming from Tamil Nadu to Kerala. Then, the Kerala government wrote to Tamil Nadu government over chemical contamination of vegetables. The protest followed after a team of Kerala officials visited various farms in nine districts of Tamil Nadu.

The current scheme can, hopefully, end the dependence on vegetables from the neighbouring states to some extent. That way, some of the consumers and supply chains in Kerala will stand to gain.

It could also look forward to export, including to Gulf destinations to cater to the Keralites there some of the vegetables whose production could outstrip demand in the State.

The other question is how much of a financial burden will Kerala have to bear from this scheme? The state is already facing financial crunch what with the Vijayan government going on a spending spree for welfare measures during the Coronavirus pandemic.

There is no doubt that the scheme to fix a floor price for vegetables has good intentions but there are too many loose ends to be tied up.  These put a question mark on the feasibility of the scheme and its longevity.

 (Subramani Ra Mancombu is a journalist based in Chennai, who writes on commodities and agriculture.) 
First Published on Oct 28, 2020 01:47 pm
Sections