Govt moves to examine agri price panel's mandate

Decision to revise MSP calculation comes up as major states are set to go to polls

With some major states slated to go to the Assembly polls this year, the government has initiated a move to examine the mandate of the Commission for Agricultural Costs and Prices (CACP), for the first time since 2005, and revisit its methodology to calculate the minimum support price (MSP). The move follows complaints that MSPs of farm produce, especially foodgrain, are inadequate to cover production costs.

Delhi, Madhya Pradesh, Chhattisgarh and Rajasthan are slated to hold Assembly polls towards the year-end.

Officials said the government had formed a committee under the chairmanship of Ramesh Chand, director of the National Centre for Agricultural Economics and Policy Research, to study the cost concepts for fixing MSP. Its first meeting was held on Thursday. (POLLS AND PRICES)

The committee has been asked to suggest whether there is a need to reposition CACP, owing to the liberalisation of Indian agriculture.

In 2005-06, the government had appointed a committee under economist Y K Alagh to examine CACP’s terms of reference. The committee had said price recommendations should be integrated with the tariff policy. While accepting the other suggestions of the committee in 2009, the government had left out this crucial aspect, owing to opposition from the Department of Commerce.

Officials said the new committee would consider whether the methods to determine the value of family labour, the rental value of land, the interest on capital, the depreciation of fixed assets, etc — factors vital to calculating MSP — were appropriate. The committee would have representatives from the state governments of Andhra Pradesh, Uttar Pradesh, farmers’ organisations and the Department of Economic Affairs,

In the last few years, CACP has drawn criticism because of its suggestions to increase the MSP of wheat and rice by only nominal amounts. Between 2003-04 and 2012-13, the MSP of common-grade paddy, as recommended, rose 127 per cent; for wheat, it rose 107 per cent. However, since then, the commission suggested recent marginal increases in the MSP of both wheat and rice, as their output and stocks exceeded the demand.

“If we continue to follow the price policy to incentivise farmers, it would lead to major imbalances in the demand and supply of farm commodities, primarily wheat and rice, and mess up the market,” said CACP Chairman Ashok Gulati. He said CACP’s current mandate was adequate to take care of the concerns of farmers, adding there was no need to change that. “Our terms of reference clearly say the demand and supply of a particular commodity, as well as the impact of a decision on the rational use of land, water and consumers, should be kept in mind before recommending the MSP,” he said.

CACP determines the MSPs of 25 agricultural commodities, including rice, wheat, pulses and oilseeds. The greatest impact of the entity’s decision is seen in the case of wheat and rice, as their MSPs are also the de-facto procurement prices. “The current MSP does not even cover all input costs. If that is the case, what is the need of an MSP?” asked Yudveer Singh, a representative of the Indian Coordination Committee of Farmers’ Movements and a member of the committee set up to examine CACP’s mandate.

Experts such as former CACP Chairman T Haque said there was a need to examine CACP’s mandate because the government faced excessive fiscal strain, owing to high support prices. Also, farmers weren’t pleased with the recommendations, he said.

Adding, “It could also be a ploy to weaken the commission.”