Agriculture ministry seeks price support viability

The ministry of agriculture is working on how to balance the price support system (for farmers) and commercial viability of the commodity procured under the PSS.

The ministry has sought inputs from various departments and federations involved in the government's price support system, a ministry official said.

According to sources, the matter would not have been raised at a more appropriate juncture as The National Agricultural Cooperative and Marketing Federation of India (NAFED) is seen struggling with 20 lakh tonne mustard procured this season.

The federation is likely to be left with about 14-15 lakh tonne of this by February 2006, when it has to begin procurement of the next crop.

Nafed managing director Alok Ranjan said, "The ministry has sought our inputs for the study it has undertaken on PSS and its commercial viability."

On the mustard crop next season, for which sowing will begin late this month, he said, "The next crop is likely to be 10-20 per cent better than last one. The government thus, has asked us to gear up to procure whenever next crop comes."

Ranjan agreed that procurement would be higher next season beginning late February 2006 as minimum support price under PSS has been raised by Rs 15 to Rs 1,715 per 100 kg.

Also if the crop is likely to be better on-year, market prices will remain lower than this year. The federation, which is already struggling with bulk of stocks procured this year, will then fail to offload stocks at a lower rate and rather procure huge new stocks.

Nafed's problems have risen as its tenders to produce mustard oil also has evoked lukewarm response.

"Only Nafed has signed to produce about 60 tonne kachi ghani oil per day. we still have not have finalised upon quantity they would take from us and are likely to begin seed processing from next week onwards."

"We have also now got some millers in Rajasthan to being processing oil from mustard with Nafed. These contracts, to produce not only kachi ghani but also oil produced via expeller processing, may be finalised soon."

Despite the hope of getting some millers, Ranjan still feels that "of the total procured 20 lakh tonne, we (Nafed) will be left with 15 lakh tonne as we will enter next season. Our storage problem will become huge once we begin procuring next year."

Nafed procured mustard at an all-time high of 20.9 lakh tonne at the minimum support price of Rs 1,700 per 100 kg in 2005-06.Nafed's cost price is as high as Rs 1,870 per 100 kg, including buying at Rs 1,700 and carrying cost being assessed at 10 per cent.

As per official estimates, the country's total mustard output in 2004-05 (July-June period) is around a record 7.64 million tonne, up 23 per cent from a year earlier.