INCREASING MSP FOR FOOD CROPS-GOVERNMENT DILEMMA!

Only recently that economic pundits in India were worried about the increasing disparity in grain prices between that rule within the country and that prevalent in global markets. The uncertainty regarding the decision to be taken by the Indian government as to what to do with the bumper crops expected this year is vitiating the situation further. While government does not have adequate grain storage capacity to store all the food procured, export is likely to be uneconomical, especially wheat, if one goes by the prices obtaining in international market. One of the reasons attributed to this "catch-24" situation is the relatively high prices being paid to the farmers who find it profitable to sell their "fruits of labor" to the government rather than to private traders. If the recommendations of the CACP, which are under the consideration of the government, are accepted there is bound to be a cascading effect on domestic food prices with potential for civil unrest by a population already burdened with high food inflation. Here is a take on this critical issue which raises more questions than answers regarding the direction in which the country is moving. 

"There is unease in the government, especially in the finance ministry, on the implications of the 15-53 per cent rise proposed by the Commission on Agricultural Costs and Prices (CACP) in the Minimum Support Price (MSP) for kharif crops.  However, the CACP has defended its recommendations as just enough to ensure a reasonable return to farmers and for food security. The Cabinet is likely to take a decision on the MSP next week, to give enough time to farmers on planning their sowing decisions. Official sources were doubtful if an increase could be sustained beyond 10-25 per cent, barring one or two crops where production needs to be enhanced or farmers had faced big losses due to unfavourable weather conditions, as in groundnut. Besides, the Prime Minister's Office has ruled out any possibility of a bonus in addition to the MSP. Officials say a bonus is to be considered if the MSP does not take into account any sudden increase in cost of production or any external factor not factored in. There is no case for an additional, said officials. It is learnt the ministries of finance and food have questioned the recommended increases of the CACP, citing high inflation and food prices as a cause of worry"

CACP is, of course, a knowledgeable body and may not like any questions raised against its calculations and estimates. But if these new MSP figures are worked out on the economics of running a farm of one acre of land or such small land holdings, so common in India, it may be a skewed projection. Government must take into consideration the non-viability of farms below a certain size and if feasible evolve a program that will compensate poor farmers in stead of raising MSP to alarming levels which will only enrich the pockets of large farmers running big farms. It is true that the task of a government in balancing the interests of farmers and consumers is an unenviable one and offering advice ad libitum may be easy for critics. Still all hues of opinion must be listened to before taking a realistic decision equitable to all.

V.H.POTTY
http://vhpotty.blogspot.com/
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