Mumbai, 7 Jun (Commoditiescontrol): It is that time of the year when reports/talks of potential crop size, weather and output forecast, price of fertilisers, etc take to centre stage. Alongside with these reports, the announcement of minimum support price (MSP) by the government, is eagerly awaited so that farmers can undertake planting activity of remunerative crops.
Decision on MSP will be soon out, considering the fact that the South-West monsoon has hit Kerala last week, although its extension to rest of the part remains sketchy so far. But, the markets are buzz with the talks of MSP announcement, which is likely to be 5-20 percent higher taking into consideration a sharp rise in cost of farming inputs.
The MSP hike this year could be the highest since 2018-19 when a new policy of 50 percent profits over computed cost of production led to MSP hikes for kharif crops in the range of 4.1-28.1 percent.
In the last three years, MSP increases were roughly in the 1-5 percent range.
It is believed that the Commission of Agriculture Costs and Prices may have recommended the sharpest hike in MSP this year for oilseeds like soyabean and groundnut. Among pulses, tur and moong may also see steep hikes in support prices, as the imports of these items rose last year amid a domestic supply crunch. The government also reckons that higher domestic production of other oilseeds will help reduce palm oil imports.
While elevated MSPs, backed by procurement, could potentially boost rural income and purchasing power, these can also increase inflationary pressures further. Wholesale inflation in April rose to 15.08 percent, highest in at least 17 years.
Food inflation came in above the overall retail price inflation for April and May, 2022. It was 8.1 percent in April, while the CPI inflation was 7.79 percent.
The cost of production for MSP will be include all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel and irrigation and an imputed value of unpaid family labour.
Experts believe that the rise in MSPs of commodities such as oilseeds, pulses and nutri-cereals (jowar, bajra and ragi) and cotton could be higher than for paddy as the idea is to encourage farmers reduce cultivation of water-intensive crops and aid crop diversification.
They have suggested to the government that the focus should be on realigning the MSPs in favour of oilseeds, pulses and coarse cereals to encourage farmers to shift to these crops, which are environmentally sustainable and thereby reduce the country’s dependence on imports.
India imports about 55-56 percent of its total domestic requirement of edible oil while 15 percent of pulses consumption is met through imports.
Recently, the government allowed tariff-free imports of crude soyabean and sunflower oils during this financial year and the next. The main aim was to take on food inflation, that scaled higher post break-out of war between Russina and Ukraine, amid supply disruption.
Further, the extreme hot weather conditions in India and certain other countries threatened supplies of core grains. Also, the protectional policies enforced by countreis globally, impacted the availability of key food grains.
India's tax waiver on soyoil and sunflower oil is subject to an annual cap of 2 million tonne for each, which many believe will more than suffice to meet the needs of domestic refiners and ease supplies in the domestic market.
A waiver of basic customs duty for the two edible oils, which together account for a quarter of India’s edible oil imports, was extended till FY24-end, and a residual 5 percent agriculture infrastructure development cess on the two crude edible oils was removed.
According to media reports, as on July 1, the Food Corporation of India (FCI) is expected to have a rice stock of around 29 to 30 million tonne (MT) excluding around 17 MT of grain receivable from millers against the buffer norm of 13.5 MT.
Prices of farming inputs like electricity, transporarion and pesticides have seen big increases. Though prices of fertilisers and key fertiliser inputs also increased in the global market, a sharp increase in subsidies by the government will give farmers largely immune to the cost increases.
The government’s food subsidy expenses are expected to rise further from budgeted Rs 2.06 trillion for 2022-23.
The government has decided to absorb a substantial part of the rise in fertiliser prices and subsidies are expected to touch Rs 2.15 trillion in 2022-23 against Rs 1.62 trillion in 2021-22 mainly because of spike in global prices of phosphatic and potassic (P&K) fertilisers and urea in last one year.
Experts opine that the governments' thurst should be on raising the MSP of oilseeds and pulses production so that import dependence is curtailed and farmers’ income get a boost.
While FCI procures rice during October-September period from grain surplus states of Punjab, Haryana, Chhattisgarh, Odisha, Andhra Pradesh and Telangana for meeting public distribution system (PDS) requirement, the farmer cooperative Nafed procures oilseeds and pulses when prices go below MSP. Nafed has to maintain a buffer of 2.2 MT of pulses as buffer stock.
(By Commoditiescontrol Bureau: +91-22-40015505)