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Business Standard / New Delhi August 26, 2009, 0:58 IST
The government’s decision to only marginally hike the minimum support prices (MSPs) of paddy, pulses and selected oilseeds, and to freeze the prices of other crops at last year’s level, is unlikely to go down well with farmers in a drought year. The timing of the announcement of new prices is also flawed, as kharif sowing is virtually over in most of the country. On paper, the paddy MSP has been upped by Rs 100 a quintal to Rs 950 for common varieties, and from Rs 880 to Rs 980 for fine varieties. But considering that the government had paid a bonus of Rs 50 a quintal on paddy last year, this year’s actual MSP hike works out to only Rs 50 a quintal, or about 5 per cent, which is of no consequence in view of the high ruling prices of rice and the escalation in the cost of production due to deficient rains. The MSPs of the major pulses have also been stepped up by small margins, but here too the new prices range from Rs 2,300 a quintal for tur (arhar) to Rs 2,760 for moong, which are low when compared to the prevailing market rates.
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The government’s decisions seem to have been guided more by concerns of food price inflation than protecting the interests of the farmers, who are already in a difficult year. But this approach may prove counter-productive as the low MSPs may prompt farmers to shy away from selling their stocks to the official agencies, making it difficult for the government to leverage its grain reserves for taming open market food prices.
MSPs are relevant only in a few states, where the official gain procuring agencies operate and where farmers have marketable surpluses, produced largely from irrigated lands. These farmers have to incur extra expenditure this year on running their irrigation pumps for longer hours because of the shortage of rainfall. Diesel consumption in the rural areas has gone up substantially, even as the prices of diesel were raised last month. Labour costs have surged due to the implementation of the National Rural Employment Guarantee Programme. Other costs, including those of plant protection chemicals and transportation, have also swelled. Unfortunately, these factors have not been taken into account. Nor have the prevailing domestic and international prices been taken into account while fixing the new MSPs. The only option for the government now is to announce a bonus on the MSPs of paddy and pulses so that the shortfall in the output of these essential commodities in the kharif season can be made good, even if partly, through larger and early planting of rabi crops.