 "Creating separate agency to manage pulses buffer not feasible: CACP Chief")
The Commission for Agriculture Costs and Prices (CACP), the main price setting body of the government has a vital role to play in ensuring that farmers income is doubled in line with the Centre’s objective. In an interaction with Sanjeeb Mukherjee, CACP chairman Vijay Paul Sharma said that MSP is just one tool to boost farm growth and so far it has declared an MSP which is more than cost. He also disregarded the need for a separate agency to manage pulses buffer stock. Edited Excerpts
In the last two years, there has been a lot of criticism of Central government on the grounds that it has failed to adequately provide remunerative prices to farmers at a time when they were suffering from drought and were also troubled by a sharp drop in farm-gate rates. How do you respond to this?
Pricing policy is one of the instruments to improve agricultural productivity and growth. We need to work on non-price instruments, namely, technology, institutions and infrastructure. While recommending price policy, the Commission considers various factors such as the cost of production, supply-demand and price trends in domestic and world markets, inter-crop price parity, terms of trade and likely implications of MSP for consumers and the economy. So, despite a significant decline in international prices of food commodities, minimum Support Prices of cereals have increased by about 4.4 per cent, pulses by 9.5 per cent and oilseeds 5.5 per cent per annum during last two years.
The Arvind Subramanian Panel on pulses has laid down the rate at which pulses MSP should be fixed for next rabi and Kharif season. Do you feel giving such huge jumps in MSPs is realistic and will you adhere to those recommendations on MSP for coming two seasons?
I agree with the recommendation of the committee that there is a need to incentivize pulses producers but while recommending the MSP we need to look into farmer’s interest as well as consumer’s interest. The Commission had also recommended a significant increase in MSP of rabi pulses and in addition government has given a bonus to incentivise cultivation of pulses and oilseeds. I believe that it would encourage farmers to grow pulses and oilseeds.
The Panel has also suggested the creation of separate agency on the lines of the GST Network to handle the huge buffer stock of pulses, which the Centre now plans to create. Do you think we need a separate agency to handle pulses buffer or it can be done by the existing ones by just tweaking their operational efficiency?
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I think basic idea is to create a system of procurement, which is effective and efficient. The existing agencies have been able to handle procurement of pulses quite efficiently during Kharif season. To manage 2 million tonnes of buffer stock of pulses, it may not be feasible to create a separate agency.
A NITI Aayog report on the efficacy of MSPs released earlier this year showed that almost 79 per cent of the farmers were dissatisfied with the MSP, though they didn’t want it to be discontinued. What should be done to ensure that MSPs become relevant for the farmers?
I think an important point here is that farmers want MSP to be continued but there is a need to make MSPs more effective in terms of coverage of more crops and states. We must ensure that farmer is not forced to sell his produce below MSP but that needs strong support, cooperation and participation of State governments in procurement operations. For example, farm harvest prices even in some of the major producing states like Uttar Pradesh, Bihar, Assam, etc. fall below MSP due to ineffective procurement operations.
The MSP’s of wheat and paddy have been raised by less than 5 per cent in the last two, which is well below their cost of production. Do you intend to correct this in the near future?
It’s true that MSP of paddy and wheat has been increased by less than 5 percent during last two years but the hikes were not below the cost of production. For example, the cost of production (C2) increased by about 3.5% per year in the case of paddy and 1.5% in wheat between 2014-15 and 2016-17 but MSP of paddy increased by about 4% and that of wheat by 4.3%.
One big criticism of this government is that it has gone back on its promise to give an MSP which would be at least 50 per cent over their cost of production. How do you respond to this?
I think too much focus on pricing is not a good policy instrument. We need to improve farm profitability.
Also, though there has been a renewed and well-intended focus on raising pulses MSPs, but it has not always translated into a big switch in area, except perhaps in 2016 Kharif, but that too many experts are saying is due to farmers’ reaction to super-normal market prices. What do you have to say about this?
Prices play an important role in crop acreage allocation decisions by farmers and thereby increasing production. However, an increase in MSP must be backed by effective procurement. The Procurement agencies have procured about 2 lakh tonnes of arhar and 83 thousand tonnes of moong during this season, which is a commendable achievement.
Many times, it has been seen that MSPs have been declared either in the middle of sowing season and sometimes even late, which stops the farmer from taking the informed division. How do you plan to correct this?
Generally, the MSPs are announced before the sowing season. The CACP submits price policy reports well before the sowing season, e.g. Kharif price policy report is submitted on 31st March and rabi report on 31st July. Similarly, sugarcane report is submitted by 15th August, copra by 7th September and jute by 15th October.
Many farmers and industry associations particularly from the sugar sector complain that the calculation done by CACP to arrive at the average cost of production is faulty, which is why despite a sharp increase in cost, the FRP of sugarcane hasn’t gone up by much. How do you respond to such criticism?
The Commission uses data provided by Directorate of Economics and Statistics, Ministry of Agriculture & Farmers Welfare, under the “Comprehensive Scheme for Studying Cost of Cultivation of Principal Crops in India” covering about 19 States and 8200 sample households. There is a scientific method of sample selection, data collection and analysis, so it’s not true that estimates of the cost of production used by CACP are faulty.
Of late there has been a talk of deficient-financing to compensate for the losses. However, it has not been successful in the first two attempts in cotton. What are your views on this?
I think you are talking about Price Deficiency Payment as recommended NITI Aayog in its Occasional Paper on Raising Agricultural Productivity and Making Farming Remunerative for Farmer. The concept is similar to Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programmes under the 2014 Farm Bill of the US. It is a good concept but there are implementation problems. In order to implement Price Deficiency payments, we need to create an appropriate eco-system and more importantly strong interest and commitment of the state governments.
Finally, as per you what should be the direction of India’s price policy of agriculture produce to ensure that on one hand, farmers get adequate compensation, while on the other consumers don’t end up paying through their nose?
I firmly believe that agricultural price policy should be remunerative enough to incentivise farmers to adopt new technologies, which will increase production and productivity and reduce the cost of production leading to a win-win situation for farmers and consumers.