By T Nanda Kumar
MSP is right here to keep. The Union government has created it abundantly clear mandatory or not, MSP will continue. The economic burden will continue to escalate (bit.ly/3s9Quws), posing significant fiscal challenges. A surgical strike seems to be a ‘no-no’ at this stage.
Let us ask: Who added benefits most from the MSP? Who, other than farmers, advantage? Whose (other than farmers) interests could be hurt if the present operations of MSP are changed? Without minimizing a single rupee due to the farmers, is it achievable to decrease the meals subsidy burden?
Let me start out with the construct of ‘cost’ in the reports of Commission on Agricultural Costs & Prices (CACP). ‘Cost’ in the ‘cost (A2+FL) plus formula’ is the weighted typical price of production of all generating states ‘weight’ being the share of production. In any such formula, there are low-price producers and higher-price producers. The lowest-price producers are Punjab, Haryana and Madhya Pradesh for wheat and Punjab, Chhattisgarh and Andhra Pradesh for paddy. MSP operations, for that reason, give a margin larger than 50% of ‘cost’ to farmers in these states, very appropriately, a reward for becoming effective! The accompanying graphic shows the percentage margins more than price for farmers in essential generating states. Understandably, farmers in these states have larger stakes in the continuance of MSP. No surprise then that these states, which get margins above 50%, contribute 84% of procurement of wheat and 74% of rice. This is the apparent element.
There are other information which typically escape scrutiny. Let us look at rice as an instance.
Start with the price of acquisition, which consists of industry-charge, commissions and price of gunny bags. The story of industry-charge (APMC cess) becoming diverse in diverse states is nicely recognized. The ‘arhatiya’ commission is controversial. My view is that the provisions in the APMC Act does not authorise the Mandi Board to repair any such commission. Services of ‘commission agents’ are, by nature and by law, voluntary and have to be paid for by the particular person who engages them. A circular issued by the Andhra Pradesh government (2005-06) states that farmers are absolutely free not to use the services of commission agents but if they do, they have to spend for it. The query for that reason is: Should the FCI spend the mandated commissions? Even if it engage agents, really should it not be a industry-determined charge for services rendered? Can it save 1.5% of the financial price by not utilizing the services of such agents?
Gunny bags (4% of the price) are procured by way of a price contract below which rates for B-Twill bags are fixed by the Jute Commissioner, basis Tariff Commission formula. The rationale for this mode of procurement comes from two elements MSP for jute and the Jute Packaging Materials (compulsory use of jute in packaging and so on.,) Act 1987. The price information comes from jute mills. This information is not offered in the public domain, but I have had the occasion to see some ‘interesting’ information challenges right here! An try to discipline inefficient jute mills was stayed by the Kolkata High Court. The government could have saved about Rs 3,000 per ton (9 lakh tons of jute bags are procured by the government). Obviously, an challenge worth revisiting.
The specifications governing procurement are a significant element impacting the price. Procurement suggestions for paddy enables 17% moisture, 3% immature grains, 5% broken & discoloured, and 6% admixture of reduce good quality. Rice received from the millers let an upper limit of 14% moisture. Brokens are permitted to the extent of 25% for raw and 16% for parboiled rice. Focus on the major ones: moisture and brokens. Admitted that rice is hygroscopic in nature, and these are upper limits. There is proof that 13% moisture levels are achievable for rice in regular situations. But, 25% and 16% brokens? Surely, time to rethink? Many reports show that milled rice from procured paddy do not necessarily have such levels of brokens. But rice delivered to FCI miraculously ‘achieves’ a level of brokens 24-25%. Is there anything that we do not know?
What about these farmers who bring paddy at moisture levels a great deal significantly less than 17% and get paid the very same MSP? Would it make sense if they poured a couple of buckets of water to attain 17% moisture and get paid for the work? Is there industry-sensible collection of information to make a decision on a median moisture level and payments created on measurable parameters (e.g., milk procurement by co-ops) to incentivise these who bring superior good quality? If our rice mills are generating 25% brokens, it is time we took a significant view of them! Where will such rice sell other than in ration shops? While situations through harvest and the hygroscopic nature of grains have to have to be factored in procurement suggestions, there is a case to redefine requirements, albeit with accommodation for reduce good quality with a worth-reduce. This will save the government some funds and incentivise farmers.
At the distribution finish, there are 5.5 lakh ration shops managed mainly by men and women. There are livelihoods, commissions and ‘leakages’ involved right here as nicely! Given the reality that MSP will continue to enhance the fiscal burden of the government and surgical strikes are ruled out for the time becoming, continuous nibbling at price elements will not do harm, it could really do fantastic!
Government could start out by searching at fixing superior specifications as the ‘reference’ for MSP, retaining the present maximum permissible limits with suitable worth-cuts. Analysis of samples across several procurement centres could give us a actual image. A re-appear at the costing of jute bags may yield some dividends. The permissible percentage of brokens can be brought down drastically primarily based on a series of sample milling trials. A viewed as view on whether or not FCI really should use commission agents in procurement and the query of legality of APMCs mandating a commission can make some distinction.
And ultimately, the government of India really should mandate that all payments on account of MSP will be transferred straight to the accounts of the farmers and not by way of any third party. This step alone will make a distinction.
An afterthought: if MSP is created mandatory, do we have to have FCI and all this paraphernalia? After all, government guarantees a minimum price tag for sugarcane with no procuring even a single ton!
The author is Former meals & agriculture secretary, GoI
Views are private