Pulses' MSP hiked by Rs 275 a quintal; Rs 50 rise for paddy

The increase in MSP is much below the BJP's 2014 election promise of giving farmers MSP, which is 50% more than the cost of production

After much confabulations, the Centre has settled in favour of a nominal Rs 50 per quintal increase in the minimum support price (MSP) in paddy for the 2015-16 crop season, but approved a steep Rs 250-275 per quintal increase in MSP of kharif pulses tur, urad and moong to give a strong signal to growers.

"The Cabinet Committee on Economic Affairs (CCEA) has approved the increase in the MSP of paddy for the 2015-16 kharif season," an official statement said. The decision on paddy is in line with the recommendation of the Commission for Agricultural Costs and Prices (CACP), a government advisory body.

Officials said though the agriculture ministry has proposed a Rs 50 per quintal increase in the MSP of paddy for the 2015-16 season, the same as that recommended by CACP, a section within the government felt the increase could have been higher, given the losses farmers have suffered in the past year due to unseasonal rain. The matter was scheduled to be taken up in the previous meeting of the Cabinet, but was postponed. The increase in MSP is much below the Bharatiya Janata Party's 2014 election promise of giving farmers MSP, which is 50 per cent more than the cost of production. The new MSP of common grade paddy for the 2015-16 procurement season that will start from October will be Rs 1,410 per quintal, while that of Grade 'A' paddy will be Rs 1,450 per quintal.

However, the new MSP of tur for the 2015-16 season will be Rs 4,625 per quintal, moong will be Rs 4,850 per quintal and for urad, it will be Rs 4,625 per quintal. The MSPs in case of pulses includes a bonus of Rs 200 per quintal.

In kharif oilseeds, the MSP of groundnut has been increased by Rs 30 per quintal to Rs 4,030, while that of yellow soybean has been increased by Rs 40 per quintal to Rs 2,600. The MSP of sunflower seed has been raised by Rs 50 per quintal from Rs 3,750 per quintal to Rs 3,800 per quintal. Incidentally, the prevailing market price of all three varieties of pulses is more than the MSP, moreover, there is limited government procurement in the same. In the retail markets, urad is selling at Rs 112 per kg, up from Rs 72 a year ago, while moong is being quoted at Rs 103 per kg up from Rs 97 a year-ago, while arhar is at Rs 113 per kg, up from 72 a year-ago.

"The Cabinet has directed a credible procurement mechanism for pulses and oilseeds should be put in place if the need arises," the statement added.

India imports around four million tonnes of pulses each year as domestic production is well short of the demand, while the same is the case with edible oils, where the country is expected to import a record almost 14 million tonnes in 2015-16, up from 13.5 million tonnes in 2014-15.

"The government is subsidising production of rice, wheat and sugarcane, in which we already have a surplus, while proper attention is not given to pulses and oilseeds, which we are importing. The bonus of Rs 200 on pulses is a step in the right direction, but it could have been higher," Ashok Gulati, Infosys chair professor, agriculture in ICRIER and former chairman of CACP, told Business Standard . He said the price policy should not be used to compensate farmers, but instead that should be done through a proper insurance policy.

The MSP of maize, which is one of main coarse cereals grown during the kharif season has been raised by Rs 15 per quintal, while that of cotton has been increased by Rs 50 for both medium and long staple. The new MSP of medium staple cotton is Rs 3,800 per quintal, while that of long staple ones is Rs 4,100.

"The government's vision that by increasing MSP of pulses and limiting it for paddy, they would be able to shift farmers, might not be realised, as pulses are grown largely in rain-fed areas, while paddy is grown in irrigated zones. That apart, the prevailing market price of pulses is higher than the MSP and third, there is an inadequate procurement mechanism for pulses. Therefore, from the point of view giving a direction, the move might be good, but on ground I feel the situation is different," Sudhir Panwar, president of Kisan Jagriti Manch and member of Uttar Pradesh Planning Commission, said.

YES Bank, in a report, said modest increase in MSPs would help keep a tab on the food subsidies, as the procurement cost would remain restrained. While modest increase in MSPs would help cap the structural increase in food prices, (MSPs were increased at CAGR rate of 17.4 per cent during FY08-FY13 leading to double digit food inflation) risk of seasonal increase on account of sub-normal monsoon persists. As such, the government's action in the field of food supply management remains critical