Prime Minister Manmohan Singh’s Economic Advisory Council (EAC) has rejected a recommendation by a government-appointed agricultural price fixing body to increase the minimum support price (MSP) for paddy to Rs 1,000 for the current Kharif season.
Instead, the EAC has said the ad hoc price of Rs 850 for paddy declared by the Union Cabinet last month should be the final MSP for the 2008-09 season, sources told Business Standard.
The Council, headed by C Rangarajan, has also suggested that a suitable bonus could be considered at the time of procurement based on market conditions and the position of stock with the Food Corporation of India.
Last month, the Cabinet decided to refer the entire issue of price policy for Kharif season to the EAC, while setting ad hoc MSP of Rs 850 for paddy, lower than what had been recommended by the Commission for Agricultural Costs and Prices (CACP). The Cabinet also asked the EAC to review the methodology followed by CACP in recommending the MSP and suggest a suitable method to be followed in future.
The Council has agreed with the MSP recommendations for all crops, except paddy. It has also suggested that the earlier practice of having separate MSP and procurement prices should be restored.
When contacted, a CACP official expressed disappointment, adding they were yet to hear anything officially on the matter. “Since the average weighted cost of production for wheat and paddy are almost equal, we felt that both crops should be given same price,” an official said.
On its part, the EAC does not agree with the inter-crop parity argument as paddy and wheat are not competing crops and are sown in different growing seasons.
The CACP in its Kharif report submitted to the government had referred to food security, price stability, high domestic and international prices and deteriorating economic conditions of farmers as the other reasons for a substantial increase in the MSP for paddy. The government had earlier accepted the CACP’s recommendation to increase MSP for wheat to Rs 1000 for the Rabi season as well.
The CACP official also expressed his unhappiness about the government’s decision to refer the issue of fixing prices of farm commodities to the EAC. “Though we are not a statutory body, we do play an advisory role and I think we are more knowledgeable than the Council in such matters,” the official added.
However, the official welcomed the EAC’s decision to accept the other recommendations. The official also said they are open to the idea of having separate MSP and procurement price for farm commodities, a practice discontinued in the early 90s.
The CACP is an expert body, currently headed by S Mahendra Dev, which submits five reports recommending price policy for 23 crops during the course of a year.
These reports contain recommendations of not only producers’ prices but also a number of non-price recommendations, which have a bearing on prices and growth of agricultural production and other associated aspects. While formulating these recommendations, the commission takes into account a wide spectrum of data, covering the cost of production, market prices and emerging supply-demand situation, among others.
The EAC observed that the CACP’s recommendation for paddy in the current Kharif season is a major departure from the usual practice of fixing the MSP at 10-20 per cent above the total cost incurred by the farmer. In the present recommendation, the MSP for paddy exceeds the cost incurred of Rs 619 by 60 per cent.
