Opinion - Editorials   

Towards fair farm prices

The government’s recent announcements on agricultural prices are significant in that they attempt to balance the interests of the producers and the consumers. In addition to the minimum support price (MSP) for wheat for the coming rabi season and the final procurement price for the other principal food crop — paddy — the support prices for other rabi crops, including pulses and oil seeds such as rapeseed and safflower, have been announced. The announcement of the MSP for wheat is timely, coming as it does well before the start of the sowing season in November. The other noteworthy feature is the big hike in the MSP, which at Rs.1,000 a quintal is Rs.150 higher than last year. Such an unprecedented hike is justified on several counts. Despite the steady hike over the past few years — the practice has been to add a bonus to the base price at the time of harvest — the support prices, which in effect became the procurement prices, were lower than what were offered by private trade. Hence, as is the case this year, despite a satisfactory kharif harvest, the government’s procurement of wheat for the public distribution system has generally fallen short of the target. The Food Corporation of India could procure only 11 million tonnes, which though two million tonnes higher than last year, is still four million tonnes short of the target. Clearly, there is a need for disseminating information on the support prices by all possible means to farmers who are increasingly adept at tracking prices both in India and abroad.

At the global level, wheat prices have been ruling at record highs. Significant wheat producing countries, notably Australia, have reported a shortfall in production. A substantially higher MSP for wheat perhaps became inevitable considering that the government imported 790,000 tonnes at roughly Rs.1,500 a quintal, when compared to the price of Rs.850 paid to domestic farmers. Although further imports have been ruled out for now, the government is clearly under pressure to build stocks for the public distribution system. In that sense, the latest hikes in farm support prices have kept the consumers’ interests too in view. Rising food prices caused a major spike in inflation from the supply side. Although WPI inflation has come down, food prices are still a cause for worry. Similar considerations to protect the domestic consumer must have weighed with the government when it decided to ban non-basmati rice exports. However, experience suggests that it is never easy to balance the interests of the producer and the consumer through such ad hoc bans on exports.

Corrections and clarifications

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Towards fair farm prices
Back on track
Employment and growth — the emerging scenario
Steep decline in oil output may cause war
Corrections and clarifications
Pakistan politics
Modi walkout
“We would like to see the transition to a democratic government”

Copyright © 2007, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu