Don't raise MSP, consumer affairs dept tells agri min

The Department of Consumer Affairs has suggested the agriculture ministry not to tinker with the minimum support price (MSP) and try the direct subsidy method instead.

The suggestion was made at a meeting last week while discussing a follow-up on Parliament questions. “At least for crops where the market prices are ruling high, a rise in MSP is acting as a trigger for a further price rise in the case of pulses,” said an official associated with the development.

The department is of the view that direct subsidy in terms of monetary benefits could be given to the farmers when the harvest is sold to the government procurement agencies.

“The direct subsidy method has already been tried and it has resulted in increased acreage under production of pulses like tur, urad and moong in the current kharif season. If the increased acreage actually turns into an increase in production, there is no harm in trying it out for other crops as well,” said an official.

MSP acts as a benchmark for the market prices. Currently, most of the market prices are ruling much higher than MSP. This price mechanism is set for crops twice a year kharif and rabi, the winter crop.

The agriculture ministry is of the view that MSP acts an incentive for the farmer to grow more pulses, which is not a very preferred crop. An alternative to counter price rise is to subsidise crop distribution at the consumer end through state intervention, they added.

Officials in the consumer affairs ministry also said the price of pulses like urad, tur and moong had started moderating from the earlier levels, according to the data provided by state marketing agencies.

The ministry, among other measures, has requested the states to continue with the stock limits for pulses beyond March 2011 given the current shortfall in supply. Officials said it could be continued for at least another two years till the demand-supply gap narrows.

The ministry has also recommended to continue the ban on export of pulses and duty-free imports. The ban on export of pulses, barring kabuli chana, has already been extended till March 31, 2011. Similarly, the duty-free import is also likely to continue beyond that period. The country imports about four million tonnes (mt) pulses every year to meet growing demand, which stands at 18-19 mt this year. The pulse production in the 2009-10 season is expected to be around 15 mt.