Agri experts and farm bodies today said the hike in the minimum support price (MSP) of 2018-19 kharif crops would lead to inflation, widen fiscal deficit and hit badly the export of commodities like cotton, while others felt the raise in support price was insufficient.
"I commend the government for its efforts to help the farmers, but it will have many other repercussions," agriculture expert Ashok Gulati told PTI.
In absolute numbers, the paddy MSP hike by Rs 200/quintal to Rs 1,750 for this year is a record but not in percentage terms, he said.
Gulati cautioned that the sharp rise in cotton and rice MSP will hit exports badly and lead to increase in government procurement.
"The right policy instrument would have been income policy. The price policy has a limit if it goes beyond international prices. This will lead to accumulation of stock and hurt farmers even more," Gulati added.
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Stating that the kharif crops' MSP announcement was a "small victory" for farmers, Swaraj India president and founder of Jai Kisan Andolan Yogendra Yadav said however, the support price fixed is not the rate the Prime Minister had promised in 2014 elections.
"The price is also not computed at 50 per cent above the comprehensive cost (C2) being demanded by farmers' organisations," he said in a statement.
He said it is an immediate relief to farmers and not a permanent and stable solution.
"It is merely a promise, the fulfilment of which depends on government procurement and intensive support, something that has been lacking till now."
Without MSP being a legal right with a legal framework for enforcement, the support price remains discretionary and farmers are left at the mercy of the whims of the next government, he said.
Farmers group Alliance for Sustainable and Holistic Agriculture (ASHA) said while the MSPs are better compared to the dismal prices of the last four years, this is far from the historic increase demanded by the farmers and promised by the Prime Minister in 2014.
The government should enact a legislation guaranteeing the MSP to all farmers across the country in all crops, demanded ASHA national convenor Kavitha Kuruganti.
IFFCO Managing Director U S Awasthi welcomed the hike in MSP of kharif crops saying this will boost farmers income.
India Rating and Research chief economist Devendra Kumar Pant said the agency has estimated that that the increase in MSP will impact wholesale inflation by 38 basis points year-on-year and retail inflation by 70 basis points year-on-year.
Edible oil industry body SEA President Atul Chaturvedi said the hike in oilseeds MSP will boost cultivation and help the country to reduce import of edible oils.
It is necessary that MSP be linked with the productivity, to ensure higher return per hectare to farmer and provide incentives to encourage farmers of Punjab and Haryana to move from grain to oilseed, he added.
PwC India Leader (Food and Agriculture) Ajay Kakra said the hike in MSP will create a balance by shifting the focus from paddy growing states to states growing millets, oilseeds and pulses.
"Given the severe climate change factors, the move should also be accompanied with crop insurance plans to hedge the farmers risk," he added.
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