Food mountain coming up

The hike in rabi crop MSP will have noticeable implications on food management

The minimum support prices (MSP) of rabi crops, including wheat, have been hiked by wide margins yet again. Though the government has gone by the recommendations of the Commission for Agricultural Costs and Prices (CACP) — and not stepped them, as is often done in an election year — the hike is substantial enough to have noticeable implications for food management. The wheat MSP has been raised by Rs 80 a quintal, while that for pulses upped by Rs 130 to Rs 170 a quintal. These increases, amounting to between 8 and 10 per cent, may not seem large, especially since inflation has been quite high until recently, but the picture changes when viewed against the backdrop of the hikes in MSP (around Rs 150, including bonus, in the case of wheat) in each of the past two years. This has had a perceptible impact on food inflation, which has persisted even when other prices have been falling. There is also the impact on the food subsidy, which has swelled to around Rs 50,000 crore this year. The subsidy bill is bound to balloon further next year because of the anticipated procurement being higher, and the recent increase in freight charges by the railways.

Thus, the country’s food economy is heading back to the scenario in the early years of this decade when stocks had risen to unsustainable levels and the government had to resort to subsidised food exports and moderate MSP increases to discourage further production. These policies had led, predictably, to an emptying of the country’s grain coffers, necessitating wheat imports at a time when international prices were surging rapidly. The latest hike in procurement prices is also likely to push up wheat procurement at a time when the total stock in the central grain pool is already about 15 million tonnes in excess of the buffer norms. By the end of the next wheat procurement season in June, grain stocks may swell to 50 million tonnes, reminding of the scenario in 2002-03, close to the size of the food mountain of around 58 million tonnes some years ago.

While all this points to the need for a stable, long-term food management policy, some immediate steps are needed to avert this unwanted cycle. All formal and informal curbs on the private food trade should be lifted immediately. It is pointless to retain stock limits and the bar on exports when the government’s grain coffers are brimming over and domestic prices have become higher than international prices. Besides, open-ended grain procurement needs to give way to need-based purchases that will feed the public distribution system and cater to the food-based welfare schemes. On top of that, the methodology followed by the CACP for determining the MSP needs to be rationalised. The present system of averaging crop production costs in different states is fundamentally flawed. Costs in the intensively cultivated and irrigated tracts of Punjab, Haryana, western Uttar Pradesh, Andhra Pradesh, Tamil Nadu and Karnataka are generally double those in the rainfed areas of, say, Jharkhand and Chhattisgarh. Several expert committees have gone into this issue and made relevant recommendations which merit consideration, even if belatedly.