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Policy | Why the MSP is not lifting agricultural prices

Nafed and other agencies are sitting over 35 lakh tonnes of pulses procured over the last three years.

May 06, 2019 / 01:14 PM IST

Siraj Hussain 

Year after year, the Commission for Agriculture Cost and Prices (CACP) comes out with detailed analytical reports on price policy for major crops and support prices are declared by the government. The recommendations on price usually receive media attention but non-price recommendations, which are largely in the domain of reform process, are ignored. Due to a lack of political consensus, the government finds it difficult to implement non-price recommendations. So, Minimum Support Price (MSP) is used as an instrument to satisfy farmers.

The declaration of higher MSP may satisfy critical voices for the time being, but in due course media attention shifts to some other pressing issue. As a result, higher MSP remains only a paper tiger. In 2018-19, kharif and rabi MSPs for several crops were substantially hiked and farmers of paddy did benefit due to procurement. In the case of cotton, the prices remained higher than the MSP due to global factors.

While farm leaders demand that all farmers should receive MSP, the organisations handling procurement at the national level (FCI, Nafed, SFAC) are not enthusiastic about bringing more commodities under the ambit of procurement. In the case of wheat and rice, the procured stock is distributed under the PDS at a hefty cost to the government. The economic cost of FCI for wheat and rice in 2019-20 is Rs 25.06 and Rs 36.02 per kg, respectively, but the centre sells at Rs 2 and Rs 3 per kg. Thus, the Centre bears food subsidy of Rs 23.06 per kg on wheat and Rs 33.02 per kg on rice.