For a second successive year, the Narendra Modi government has effected only a moderate Rs 50 per quintal hike in the minimum support price (MSP) for paddy.
This compares to an average annual increase of around Rs 76 during the ten years of UPA rule, which saw the MSP for common paddy go up from Rs 550 to Rs 1,310 per quintal between 2003-04 and 2013-14, while similarly rising from Rs 580 to Rs 1,345 in the case of grade ‘A’ varieties.
The policy of conservative MSP increases by the present government is also apparent in coarse grains (bajra, jowar and maize), oilseeds (soybean, groundnut and sunflower) and cotton. The cumulative raise in these crops over the last two years works to just between Rs 15 to Rs 100 per quintal. Ragi and sesamum may be exceptions, but they are relatively minor crops in terms of production and acreage.
The only major crops where procurement prices have gone up significantly are pulses. But even here, the MSP hike per se for the current year over 2014-15 has been only Rs 75 per quintal each for arhar/tur (pigeon-pea) and urad (black gram), while being even lower at Rs 50 in moong or green gram. What the government has, instead, done is to grant a one-time bonus of Rs 200 per quintal on top of the MSP.
That again is a reflection of an overall conservative procurement price fixation strategy, in contrast to the UPA’s more liberal approach towards jacking up MSPs year after year.
Even in pulses, the hike in the form of a Rs 200 per quintal bonus announced on Thursday — which the government called an “exception” to the general rule of accepting the Commission for Agricultural Costs and Prices’ recommendation of only a Rs 50-75 increase in the MSP — pales in relation to the huge jumps that took place between 2009-10 and 2012-13 under the UPA.
“This government has realised the limits to raising MSPs in a scenario of falling global commodity prices. It was easy to do this during the UPA’s time when world prices of rice, wheat, corn, soybean or sugar were ruling sky high and the government, in a sense, was forced to align MSPs correspondingly,” says Tejinder Narang, a New Delhi-based grain trade analyst.
The MSP of Rs 1,410 per quintal declared for common paddy translates into a rice price of Rs 21,364 or $334 per tonne, taking 66 per cent milling recovery.
“This would be the cost of procuring at Andhra Pradesh or Chhattisgarh. Adding transport, bagging and port handling charges of Rs 1,300 or $20, the export (free-on-board) price for Indian rice will be $354 per tonne. That would be just about competitive vis-à-vis to the current $362 per tonne export quotes for white rice from Thailand with 25 per cent brokens content,” notes Narang.
But the central point is that the scope for upward revision in MSPs is far less today, compared to in 2012 and 2013 when the same 25 per cent brokens Thai white rice was being exported at an average of $500-560 per tonne.
Pulses are the sole commodity to have defied the trend of crashing prices, both domestically as well as internationally. “It is good that the government has gone in for a significant increase in procurement prices of pulses. But the fact is these are still way below the ruling open market prices,” points out S Chandra, director of Indian Society of Agribusiness Professionals, a farm extension consultancy.
Tur/Arhar is currently selling at Rs 7,200-7,300 per quintal at Karnataka’s Gulbarga market, with urad similarly trading at about Rs 8,300 in Latur (Maharashtra) and moong at Rs 7,200 in Indore.
“I expect farmers to substantially step up pulses acreages this time even without the government’s decision to give higher prices. If the monsoon turns out to be normal and production rises as a result, it is quite possible that market prices may drop to the MSP levels that would require the government to undertake procurement,” feels Ashok Kumar Kagi, a trader-cum-commission agent in Gulbarga.
Farmers generally sow urad and moong — which are both 90-day crops — in June for harvesting towards September-end. Tur is a longer duration crop of 160-180 days, with the sowing window extending till end-July.
“If the urad and moong crops are good, which will be known in three months time, and the government’s imports also start coming in from August-September, we could even see a glut developing and impacting the tur and chana which would arrive from January. But all this presupposes a normal monsoon, on which we have no clue at the moment,” adds Kagi.
Meanwhile, international prices of pulses have surged in recent months in response to production concerns in India. Since March 31, landed prices of Burmese ‘Lemon’ tur have firmed up from $935 to $1,160 per tonne, while rising from $935 to $1,230 per tonne for fair average quality urad of the same origin. These rates again are much higher than the corresponding procurement prices declared by the government for the current kharif season.