Kharif pay-off

The government seems to be committing one wrong after another on agricultural pricing. The new price policy for kharif crops is the latest manifestation. While the minimum support prices (MSPs) of the common and Grade-A paddy have been raised by just Rs 10 a quintal, those of pulses and oilseeds have been kept unchanged at last year's level, wholly disregarding current market realities. Also overlooked is the need to raise the domestic output of these crops so as to bridge the large demand-supply gap. The new prices of ordinary and grade-A paddy, at Rs 580 and Rs 600 a quintal, respectively, as also of pulses at between Rs 1,410 and Rs 1,520 a quintal, look ridiculously low at the present juncture. The whole exercise of price fixation seems to have been gone through as a mere ritual, missing a vital opportunity to use support prices as an instrument to influence crop planning and encourage farmers to boost the output of products that are in short supply. There have of course been occasions in the past when the MSPs of some crops, notably wheat and rice, were hiked substantially year after year without much justification, resulting in unsustainable stock accumulation in the Central grain pool. However, that phase ended around 2000 and the pendulum now seems to be swinging to the other extreme, with very poor price hikes being announced. Given the domestic supply-demand situation, and with international prices ruling high, this appears to be equally illogical.

It can of course be argued that measures like MSP and market intervention through procurement need ideally to be used only for preventing distress sales and not for influencing market prices. But, in reality, this cannot be the case. Barring pulses, where the shortfall in production is huge and availability in the international market limited, the prices of all other farm products tend to nosedive at harvest time and the MSP virtually becomes the benchmark price. Thus, growers often do not get adequate returns. This is borne out by studies that indicate stagnation in real agricultural incomes for the past several years. The National Sample Survey (59th round) also revealed that 40 per cent of farmers want to quit farming as it is unprofitable and risky. Moreover, the country has to reckon with the adversely impacted growth in agricultural production, which has averaged just one percentage point a year in the first three years of the 10th Plan. Worse still, the overall agricultural GDP growth has averaged below the population growth for nearly a decade. No wonder then that the farmers' distress and suicides have spurted sharply in recent years.

What needs to be realised is that unless the farmer's costs are covered and some reasonable profit margin is ensured, no one is likely to adopt either new production technology or go in for costly yield-enhancing inputs. In any case, the policy of keeping prices depressed artificially, for whatever reasons, is as untenable as keeping them high for political gains, as has mostly been the case in the past. In fact, it is not too late to take corrective action since the kharif sowing is still under way. Any bid to do so later would not bear results, as happened in the case of wheat, where the bonus (read price hike) was announced when the marketing season was half-way through. It is better to learn lessons from the past mistakes.