Revamp MSP to boost farm sector: Eco Survey

Economic cost of rice and wheat at Rs 1,262.51 and Rs 924.82 a quintal this fiscal up from Rs 1074.80 and Rs 887.51 a quintal respectively in 1999-2000 is much higher than their purchase price. The difference was being met by government subsidy. The survey said cost could be reduced by decentralised procurement, restraining MSP hike, fixing procurement price inclusive of four per cent state levies in lieu of MSP.

A stage has reached where ‘‘resources being spent on holding stocks can be better used for eliminating hunger,’’ the Survey said.

‘‘The fiscal unsustainability of providing food security through buffer stock operations is becoming increasingly evident,’’ it said, adding ‘‘carrying cost of buffer have been rising substantially in recent years, currently accounting for about 25 per cent of the food subsidy Bill’’. The biggest resource drain was storage losses, procurement incidentals, distribution and administrative cost and carrying cost.

In the last two years, foodstocks have been used as a principal resource for poverty alleviation programmes under welfare schemes. With resources currently being spent on holding stocks, it should be possible to eliminate hunger.

The yields per hectare being low except for wheat, there is volatility in production and wide disparities of productivity over regions and crops.

‘‘A shift from MSP and developing alternative products markets are essential for crop diversification and broad-based agricultural development,’’ said the survey.

It favoured adjustment of the MSP and realignment of the issue price in line with the economic cost to bring about a durable solution to the food subsidy problem. It expressed satisfaction over the progress made towards better handling of grains management with no ‘actual’ hike in the MSP of both paddy and wheat in 2003-04. Hitting out at MSP and grain purchase regime, it said, despite recent deceleration in the growth of grains output, procurement has increased significantly over the years.

Attractive MSPs and government’s policy of open-ended procurement encouraged farmers to sell their produce to the government rather than in the open market. During 2000-01 and 2001-02, there was an excessive build-up of public stocks much above the minimum buffer stock norm. Large volumes of unsold public stocks pushed up the carrying cost and raised the subsidy burden.

The enhanced MSP every year, with associated increase in economic cost was not passed on to issue prices under the public distribution system.