Kharif procurement: Govt departments call for reforms beyond MSP hike to tackle agri concerns

The procurement of kharif crops commenced on October 1 in line with the Cabinet decision dated June 19 which increased the MSP of 14 kharif crops such as paddy, jowar, bajra, ragi, maize, tur/arhar, moong, urad, groundnut, sunflower seed, soyabean, sesamum, nigerseed and cotton.

The maximum increase over the previous year was 12.70 per cent for nigerseed in oilseeds, 11.50 per cent for ragi in cereals and 7.90 per cent for tur in pulses.

Look beyond MSP hike

The documents accessed by The Indian Express show that the two financial departments i.e the Department of Economic Affairs (DEA) & Department of Expenditure (DOE) and Niti Aayog primarily focused on non-price recommendations of the Commission for Agricultural Costs and Prices (CACP), an Agriculture Ministry body which recommends MSP hike every season, and apparently opined that the government should focus on the schemes other than MSP. It also raised concerns over supply-side bottlenecks in procurement.

Non-price policy recommendations aim to achieve a long-term and multi-dimensional solution to the agrarian crisis.

As part of Inter-Ministerial consultation on MSP hike, DEA and DOE wrote that special schemes that are focussed on productivity enhancement, push towards atmanirbharta in pulses and oilseeds, crop diversification, micro-irrigation, empower farmers with solar power etc., which comes under non-price recommendations, are supported “in-principle”. However, these special schemes may be routed through the appraisal mechanism of Expenditure Finance Committee (EFC) on financial outlays, said the departments.

“While supporting the recommendations, this ministry feels that the price increase in crops should be accompanied by implementation of key non-price recommendations also … Supply- side bottlenecks such as storage, warehouse infrastructure and transportation need to be addressed in mission mode,” reads the letter of the departments dated May 16, 2024.

In response before the Cabinet on this, the Ministry of Agriculture said that issues related to non-price recommendations will be dealt with separately by the department concerned.

Niti Aayog also stressed on non-price recommendation and said that Shree Anna (promotion for production and consumption of nutri-cereals/millets), push towards pulses and oilseed should be given due priority and close monitoring by the department.

“The price policy should be able to maintain inter-crop price parity and ensure rational utilisation of inputs and natural resources. It should enhance diversification to meet the growing food and nutritional security,” reads Niti Aayog’s letter dated May 3, 2024.

In response to this, the Ministry of Agriculture said, “…to encourage crop diversification towards oilseeds and pulses, the highest absolute increase in MSP over the previous year is proposed for these crops viz. Nigerseed by Rs 983 per qtl., sesamum by Rs 632 per qtl., tur by Rs 550 per qtl., sunflower seed by Rs 420 per qtl. And that of urad by Rs 450 per qtl.”

Low production of Oilseeds

While the maximum increase in MSP was proposed for oilseeds, the Department of Food & Public Distribution (DoFPD), which procures paddy, wheat and coarse grains, said that the hike has not resulted in required increase in domestic production and country needs a long-term MSP policy for oilseeds. It further said that even though an increase in production of oilseeds is estimated for 2023-24, the country will have to rely on imports to meet its requirement for edible oils.

“CACP fixes the MSP on oilseeds on a seasonal basis. Although it helps in ensuring a remunerative price to the farmers, it has not delivered the required result by means of increase in domestic production. It may be helpful if a long term MSP policy, preferably for the next 5 years, is in place so that farmers know what they will get in future for their crops and may accordingly take an informed decision,” said the department in its letter dated May 24, 2024.

However, the Ministry of Agriculture rejected the suggestion and said that long-term MSP policy was not viable.

“While recommending MSP, CACP considers estimated cost of production, ongoing demand and supply situation and inter-crop parity in returns, terms of trade between agriculture and non-agriculture sector, rational utilization of land, water and other production resources. Therefore, long term MSP policy is not viable,” said the Agriculture Ministry in its response before the Cabinet.

Oilseeds are primarily used for oil, food, feed and industrial applications. However, despite domestic production, approximately 60 per cent of India’s edible oil demand, is fulfilled through imports.

Need better infra and technology

Along with DOE, DEA and Niti Aayog, DoFPD also sought implementation of other Non-price recommendations and said that warehouses/storage infrastructure constructed under any government scheme/Agriculture infrastructure should mandatorily be WDRA (Warehousing Development and Regulatory Authority) registered.

“It will help to ensure e-NWR (Electronic Negotiable Warehouse Receipt) based pledge finance. The warehouse/storage infrastructure may be declared/notified as deemed sub-market yards under state APMC act so that the logistics cost incurred on procurement can be reduced and agri commodities can be procured at a less logistic cost,” reads the letter. Similarly, the DEA and DOE said that technology upgradation in cultivation, R&D and mechanisation of farming needs to be focused upon to improve agricultural productivity.

“Improvement in marketing platforms for small and marginal farmers by promoting and strengthening FPOs (Farmer Produce Organizations), cooperatives and self-help groups (SHGs) needs priority,” reads the letter further.

In response to these, the Ministry of Agriculture said that it is implementing Agri Infra Fund (AIF) to address the existing infrastructure gaps and mobilise investment in agricultural infrastructure. It further said that the Sub-Mission in Agricultural Mechanization (SMAM) is being implemented for creating high-tech farm equipment.

Regarding marketing platforms, the ministry said that it is implementing the Marketing Research and Information Network, a sub-scheme of Integrated Scheme for Agricultural Marketing (ISAM), to link important agricultural produce markets spread all over the country. The Ministry has estimated to procure around 828 lakh metric tonnes (LMT) of 14 agricultural produce this kharif season, out of which expected procurement of Paddy alone is 806 LMT.

However, the fact is that the procurement of Rice, which recorded a continuous increase from 31.8 million tonnes in 2013-14 to 60.2 million tonnes in 2020-21, witnessed a decline during the last three seasons. The increase in MSP for paddy this season is 5.40 per cent (Rs. 117 per quintal) as the cost of production went up by 5.4 per cent over last year.