"Higher MSP will not distort market prices"

The NDA regime has announced a steep increase in minimum support price for 14 kharif crops. The question is, will this mitigate the mounting rural distress? Union Agriculture Minister Radha Mohan Singh walks Business Today through his blueprint for increased procurement and distribution.

By Team BT  
Monday, July 23, 2018

The augmentation of infrastructure required for procuring, storing and distributing crops acquired with the increased MSP will be an uphill climb. How will you translate plans to implementation?

A: Our target is broad-based commodity procurement to ensure farmers in all states are covered. We are firming up the procurement mechanism to define protocols and designated agencies.

The Food Corporation of India, and other designated state agencies, will continue to procure paddy and wheat at MSP from farmers while other agencies such as NAFED, FCI, and SFAC will continue procuring pulses and oilseed. The Cotton Corporation of India will serve as the central nodal agency for cotton price support operations but will be supplemented by NAFED. We (the government) will fully reimburse any losses these agencies incur.

How prepared are states for the increased purchase requirements that follow the MSP increase? What role does the Price Support Scheme (PSS) play there?

A: The NITI Aayog is working with states to come up with a more robust procurement mechanism. We would like to make the state government more responsible so that the response is immediate when prices in the market fall.

The PSS is implemented for oilseeds and pulses procurement when states request it. States agree to exempt the procured commodity from mandi tax. They assist central nodal agencies in arranging logistics such as gunnysacks, working capital for state agencies and revolving funds from PSS operations.

The government guarantee of Rs 19,000 crore given to NAFED to run PSS smoothly has recently been increased by Rs 10,000 crore.

What about the actual storage and disposal mechanisms? To purchase the increased MSP, won't the government need more space?

A: Procured stock is stored in warehouses of the Central Warehousing Corporation or warehousing corporations of individual states. These have to be disposed of within six months. And central agencies do that through competitive bidding..e-auctions, open auctions, online platforms for commodity exchange and even online spot markets.

The new procurement mechanism we're working out will include the disposal mechanism as an integral part. We are even looking at linking procured pulses and nutri-cereals to welfare programmes like the Public Distribution Scheme.

How will this enhanced MSP affect rural incomes?

A: Our government is committed to doubling farmers' income by 2022. The all India average increase in income per hectare is substantial according to the 2018/19 projections of the Commission for Agricultural Costs and Prices.

The increase was highest for sunflower seed..around Rs 6,929.6 per hectare; followed by paddy and jowar with average increases of Rs 5,573.1 per hectare and Rs 6,369.9 per hectare, respectively

The impact of an increased MSP for nutri-cereals, pulses and oilseeds will naturally increase rural incomes, and enable farmers to save and re-invest in agriculture. A virtuous cycle in the making.

What is your larger vision and how will you help the Indian farmer become a stronger player in the global market?

A: Higher MSP will not distort market prices. We have a dual approach - create a robust agriculture market structure; and when markets fail, carry out interventional procurement.

Right now, we're working on a new market architecture to set up Retail Agriculture Markets - we're calling them GrAMs - at the farmers' doorstep and linking them organically to reformed and competitive wholesale agriculture markets - APMCs.

Both these markets will be further linked to the eNAM platform for an efficient and integrated agriculture market. An agricultural market will strengthen the link between production zones and consumption zones; and as equilibrium is reached between demand and supply, farmers will benefit both in the domestic and in the global arena.

Our focus is on enhancing agri-exports.MSP serves, as a price signal to farmers and procurement will be undertaken when markets are not able to provide optimal prices. The larger vision is to enhance farmers' income and improve their welfare.

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