WPI Spotlight

Farmers in India want the Swaminathan Report recommendations implemented, including the suggestion that Minimum Support Prices (MSPs) should be based on the production cost plus 50 percent of that cost as profit margin.

In addition to a higher MSP, farmers want loan waivers (see Ag Perspectives, 2 June and 9 June 2017), which have been announced in Maharashtra and Uttar Pradesh. The government of India (GOI) has proposed an interest subsidy scheme that allows farmers to continue to receive short-term loans of up to Rs.0.3 million ($4,615) at a lower rate of interest. Interestingly, if all the states opt for loan waivers, the amount would total $49.1 billion, 2.6 percent of India’s gross domestic product (GDP) of $1.88 trillion. This should help 32.8 million small and marginal farmers, and about 33 percent have access to institutional credit (National Sample Survey 2013). However, the situation would remain unchanged for the rest.

Meanwhile, GOI, state governments and their agencies are unable to buy grain/oilseeds/pulses at the declared MSP. The Madhya Pradesh government issued a directive that the trade and actual users are to buy those commodities only at the MSP and that doing so at a lower price will be considered a crime. The trade is up in arms against this, the soy sector has been strongly impacted, and the oil mills have been unable to purchase stocks and maintain operations.

GOI also wants the private sector to reduce the prices of inputs, including pesticides and seeds. The price control order for cottonseed is already in place, and the trait royalty is also set. Because of the price fix, seed companies are not investing in research and new technologies. The reason given for this is to keep a check on input prices and lower the cost of production of agricultural commodities. As the cost of production is lowered, GOI will then raise the MSP. However, this is unlikely to solve the problem. The table below shows the 2017 MSP for various commodities as recommended by the Commission for Agricultural Cost and Prices (CACP), which are much higher than expected.


(This article was originally published in the 16 June 2017 issue of Ag Perspectives as part of the in-country analysis of India by WPI staff. Click here to find out more about subscribing to Ag Perspectives.)

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