Pulse of the matter

Subramanian panel’s recommendations on MSP procurement operations are well worth implementing.

By: Editorial | Published:September 19, 2016 12:02 am

The Centre should heed the advice of a panel headed by Chief Economic Adviser Arvind Subramanian to immediately lift stockholding limits and export bans on pulses, along with launching a “war effort” to procure moong, urad and tur at their announced minimum support prices (MSP). Open market prices of moong in states like Rajasthan are currently at around Rs 4,500 per quintal, below not only the Rs 6,500-levels of this time last year, but even the MSP of Rs 5,225 fixed for 2016-17. Urad and tur prices are as of now ruling higher than MSPs, but that can change once their mandi arrivals, too, start from early-October and early-December, respectively. India is headed for a bumper crop this time, with farmers sowing a record 145 lakh hectares area under kharif pulses, 29 per cent more than last year. They were induced to plant more by the high prices prevailing until three months ago, apart from good monsoon rains.

The worst case scenario for farmers, the Subramanian committee has rightly noted, is weak government procurement combined with continuation of stockholding and export restrictions. It will lead to a price collapse, benefiting consumers in the short run. But the erosion of confidence among farmers — and the severe dent on the “credibility of government policies” this would engender — will result in lower plantings next year and consumers paying through their nose again. This cycle needs to end. The committee’s report has shown production and price volatility in pulses to be far higher than for cereals, which is neither in the interests of producers nor consumers. Farmers need to be encouraged to grow more pulses not simply because demand is projected to rise by roughly 50 per cent between now and 2024. Pulses also help in soil rejuvenation and naturally fixing atmospheric nitrogen, without consuming much water.

The committee’s other recommendation worth considering is to create alternatives to state agencies in MSP procurement operations. There is no harm, indeed, in roping in private players for procuring on government account, based on competitive tendering and transparent rules of MSP enforcement. This could set off a virtuous process where such entities are incentivised to create backend infrastructure for purchase, storage and movement of not just pulses, but all farm produce where MSPs exist only in name. For farmers, it matters little whether MSP delivery is happening through the FCI and Nafed or ITC and Cargill. If the latter can do the job more efficiently and cost-effectively, the taxpayer, too, wouldn’t mind.