Kharif 2019: Mandi prices still 40% lower than MSPs for many crops

By Prabhudatta Mishra

At a time when both the government and RBI are concerned about rising food inflation, out of 14 kharif crops, for which minimum support prices (MSPs) are fixed every year, farmers have sold eight crops including tur, moong, jowar, bajra and sunflower at 11-39% below their benchmark prices since the harvesting season started in October.

The mandi prices were about 5-6% lower than MSPs in the case of cotton, soyabean and urad until December 17. Only paddy, sesamum ruled above their MSPs while maize was flat during this period (see chart). The MSPs for kharif 2019 crops were raised by 1-9% from the year-ago season. The NDA government, in the run-up to the general elections, had raised the MSPs of kharif 2018 crops in the steep range of 4-52% to fulfil a promise of 50% profit for farmers over the costs of production (A2+FL) after subdued increases over the previous four years.

Crisil Research had recently said that while a marginal decline in kharif output will improve mandi prices and hence profitability, higher yields could bolster winter crop profitability. Overall farm profits/hectare will likely grow 7-9% on year in crop year 2019-20, it said. Though this is muted in comparison to 26% growth witnessed in 2018-19 on a very favourable base, it augurs well for the economy amid a slowdown.

The Reserve Bank of India (RBI) earlier this month slashed its GDP growth forecast for 2019-20 to 5% while it also raised its retail inflation forecast to 4.7-5.1% from 3.5-3.7% for H2FY20. Food inflation scaled an over-five-year peak at 10.01% in November and was the biggest driver of headline inflation even though core inflation remained almost unchanged at 3.6%. The subdued prices of agriculture crops have had no impact on rates of key horticulture produce — onion and potato — that have skyrocketed even with minimal supply disruption.

Meanwhile, even as the overall kharif pulses prices were down by 6-17% from their respective MSP levels so far, the government on December 18 announced a plan to immediately sell these pulses from the buffer stock to the state governments at current market rates. Out of 8.4 lakh tonne proposed to be sold from buffer stock, as much as 6.7 lakh tonne are kharif pulses — tur, urad and moong.

“When the farmers are bringing their crops to market, that too this year when harvesting has been delayed, there is no reason the government should release stock from the buffer. It will further pressure mandi prices. If the government is concerned about consumer prices of pulses, it should check on retailers,” said Chaudhary Pushpendra Singh, president of Kisan Shakti Sangh, a farmer organisation in Uttar Pradesh.

He said Madhya Pradesh farmers got average Rs. 4,500/quintal in selling urad in November which has further come down to around Rs. 4,000 now. Though the low price in Madhya Pradesh is not benchmark, still any stock clearance may lead to further fall in farm-gate prices, he added.

The government earlier used to sell its stock only during off-season. Urad prices in Madhya Pradesh are lower compared to some other key producing states like Rajasthan and Madhya Pradesh due to quality issue. However, the average mandi prices were showing a declining trend in all the states.

Source: Financial Express