Q&A: Ashok Gulati, Chairman, CACP

'Demand-supply imbalance between cereals and oilseeds needs correction'

As sowing for the kharif crop season is now nearing its end, the focus has shifted to rabi crops. Though comfortable in cereals, the country is deficient in oilseeds and pulses. In an interview with Sanjeeb Mukherjee, Commission for Agricultural Costs and Prices (CACP) chairman Ashok Gulati said the government should not focus on palm and other oilseeds to correct this imbalance and also cut down on the import bill. Edited excerpts:

What factors were considered by CACP in fixing the minimum support price (MSP) of rabi crops for 2011-2012. How is it different from previous years?
For the rabi crops, the imbalance in demand and supply situation between basic staples (excess of cereal supplies reflected in bulging stocks) and massive shortage of edible oils reflected in rising import bill weighed in more heavily, which was also the thrust at the time when recommendations for kharif MSP were made. The Commission would like the government to take up palm oil cultivation on a war footing.

 

We have the potential of growing palm oil on almost a million hectares that can give almost four million tonnes of oil. We need to focus on that, and also our traditional oilseeds such as rapeseed-mustard and safflower in the rabi season.

While the foodgrain stocks with public agencies are touching 64 million tonnes as on July 1, 2011, the edible oils import bill touched Rs 29,000 crore in 2010-11. This is somewhat new this time and needs urgent focus. A 40 per cent rise in diesel prices and 20 per cent increase in farm wages were also a big factor in calculation of MSP.

What is the direction of MSP for rabi that your assessment has revealed?
The direction of change is always northward! MSPs don’t slide back. The question is of degree. The Commission keeps a track of market prices and MSP almost on a weekly basis. And we don’t want to be very much out of line either side.

In fact this year, the Commission observed a peculiar phenomenon. In several mandis in Bihar, Gujarat and eastern Uttar Pradesh, the market prices of wheat went way below the MSP. This was pathetic as procurement machinery was either absent or very slow. We talked to the concerned authorities at the Centre as well as the states. Each one gives their reasons and excuses, but the fact is that farmers in these states have suffered a loss by selling their wheat at 10-15 per cent below the MSP.

I feel it and take it seriously, as it amounts to someone having cut farmers’ incomes by 10-15 per cent in these states. We have requested the government to look into this, and pay due compensation to these farmers, if possible.

What kind of challenges did you face while calculating the MSP for crops?
The biggest challenge is the mindset of various stakeholders in price policy formulation. From farmers to processors to official machinery, and price policy experts, many have this impression that MSP policy is a cost plus exercise. The reality is that it is not, and cannot be so. Cost is an important and integral part of this, but not the only one to decide about MSP.

There are several other factors that go into it, especially the demand side factors. Also, within cost, whose cost are we talking about and which cost? Our mandate says we need to cover the paid-out costs of all states but comprehensive cost only of efficient states. This element remains the most confused part of discussions with the stakeholders.