The rationale behind the sharp increase in the government’s minimum support price (MSP) for oilseeds and pulses in the past three years has been to encourage growers to shift from cereals to non-cereal crops.
However, a closer look shows this has not happened in most oilseeds and pulses, barring a few, prompting many experts and economists to question the strategy. Instead, they suggest an increased focus on technological innovation in these crops would be better.
In a research note, Religare Commodities notes that barring soybean, cotton and paddy, no other crop responded significantly to the rise in MSP. This is despite the fact that since 2008-09, MSPs of most farm commodities have been raised sharply.
| PERFORMANCE REPORT MSP increase (in Rs /quintal) | |||
| Crop | 2008-09 | 2012-13 | % Rise |
| Jowar | 840 | 1,500 | 78.0 |
| Maize | 840 | 1,175 | 40.0 |
| Soybean (Yellow) | 1,390 | 2,240 | 68.0 |
| Groundnut | 2.100 | 3,700 | 76.0 |
| Mustard | 1,800 | 2,500 | 39.0 |
| Tur | 2,000 | 3,200 | 60.0 |
| Urad | 2,520 | 4,300 | 70.6 |
| Wheat | 1,000 | 1,285 | 28.5 |
| Paddy (common) | 850 | 1,250 | 47.0 |
| Source: Commission for Agriculture Costs and Prices (CACP); MSP: minimum support price | |||
The Religare research note shows that between 2010 and 2011, the area under jowar dropped 14 per cent, moong by 16 per cent, arhar by 15 per cent and groundnut by 14 per cent.
| Sowing area Acreage in million hectares | ||||
| Crop | 2010 | 2011 | % Chg* | % Chg* in MSP |
| Paddy | 35.65 | 38.61 | 8 | 8.0 |
| Soybean | 9.32 | 10.29 | 10 | 18.0 |
| Jowar | 3.05 | 2.62 | -14 | 11.0 |
| Bajra | 8.63 | 8.08 | -6 | 11.0 |
| Maize | 7.58 | 7.53 | -1 | 11.0 |
| Arhar (tur) | 4.56 | 3.88 | -15 | 7.0 |
| Moong | 2.81 | 2.37 | -16 | 10.0 |
| Urad | 2.53 | 2.33 | -8 | 14.0 |
| Groundnut | 4.98 | 4.29 | -14 | 17.0 |
| Sunflower seed | 0.28 | 0.27 | -4 | 19.0 |
| Cotton | 11.02 | 12.05 | 9 | 12.0 |
| *(2011-12 vs 2010-11) Source: Religare Commodity Research | ||||
“This clearly shows that pulses, oilseeds and coarse cereals are more responsive to non-price factors like rainfall, water availability, etc, and not prices,” said P K Joshi, South Asia director of the International Food Policy Research Institute (IFPRI).
Where the MSP rises have had an impact is on areas better endowed with resources like proper irrigation facilities, even as farmers of rainfed areas have not responded adequately. “A significant rise in the MSP would definitely provide some relief to farmers, as they would be assured of reasonable returns. However, the ultimate outcome depends on the southwest monsoon, considered the backbone of Indian agriculture. Even if farmers opt for a particular crop, considering the higher returns, monsoon advancement and the rainfall distribution would have a significant imp-act on the output,” An-gel Commodities said.
Joshi of IFPRI said instead of focusing on price as an incentive to encourage farmers to shift from cereal to non-cereal crops, the effort should be more on technological advance. “I don’t believe the price incentive is a sustainable method of raising production. The focus should be more on inculcating the best technology and farm practices to improve per-hectare yield,” he said.
Ramesh Chand, director of the National Centre for Agriculture Economics and Policy Research, said MSPs had failed to impact acreage shift despite a sharp increase in recent years because these are invariably below the prevailing market price. “Unlike paddy, wheat, cotton and, to some extent, mustard, MSPs of other crops just have a notional value, as there is no official procurement. This is precisely why despite the sharp rise in the last few years, there has been no tangible shift in acreage,” Chand said.
“What we have done in the last few years is not just academic increases in MSP, but a complete rejig of the manner in which one handles farm product pricing,” Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices told Business Standard recently.
