The Commission for Agricultural Costs and Prices (CACP), the government's nodal agency to recommend the minimum price for farm commodities, has explained its justification for recommending a sharp increase in the Minimum Support Price (MSP) for cereals, pulses and oilseeds.
The criticism was that this would stoke food inflation. However, the CACP is confident of its stand. In a report to the government, it has said the cost of production of many crops has risen sharply since 2008-09, but the MSPs have not compensated for even half of this. In the case of paddy, for instance, it says cost of production was 53 per cent higher in 2011-12 over 2008-09, but the MSP rise over the period was only 20 per cent.
India's wholesale price-based inflation rose to 7.55 per cent in May, compared with 7.23 per cent in April, because of high food and fuel prices.
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The Union cabinet last week accepted the CACP recommendations and announced a 15.7 per cent increase in the MSP for common-grade paddy to Rs 1,250 per quintal and 15.3 per cent more for grade ‘A” paddy to 1,280 per qtl. Similarly, it went by the recommendations for raising the MSP of other kharif crops such as jowar, soybean, cotton, sunflower and urad.
“Labour cost jumped 74 per cent during the second half of 2011 over the second half of 2008, while fertiliser prices have risen 30 per cent between January 2008 and January 2012, diesel oil went up by 44 per cent and fodder prices increased 60 per cent over the same period,” the Commission report said.
The MSP, said CACP, would lose much of its credibility if government agencies failed to procure farm products when prices dropped below market rates, as was the case last year in eastern India .
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It also said the Centre should, given the confusion on whether central agencies or state governments had the primary role for procurement, issue a notification clarifying their respective roles. The report also recommended that procurement of grains and cereals be outsourced to private parties if they met minimum levels of working capital, grain management expertise and commitment to invest in upgrading of marketing infrastructure.
Also, said CACP, export of common rice and cotton should not be stopped under any circumstance in the near future. If done, the government should immediately announce a 10 per cent bonus over the declared MSP to compensate growers.
To address the issue of labour shortage due to the government’s landmark rural jobs guarantee scheme, NREGS, mainly during the peak season, the Commission suggested farm labour be brought under the project’s ambit. Half the wage could be paid by the farmer and the rest through NREGS.