The Centre is set to announce significant hikes, ranging from 15 to 17 per cent, in the minimum support prices (MSP) of most crops to be planted during the ensuing kharif season.
The higher MSPs, while expected to further fuel inflationary pressures, are meant to compensate farmers for the surge in cultivation costs experienced by them in the last couple of years.
The Agriculture Ministry has proposed raising the MSP of common paddy from Rs 1,000 to Rs 1,160 a quintal for the crop to be marketed in the 2011-12 season from October, while mooting a similar Rs 160 jump for Grade ‘A' varieties grown in Punjab and Haryana.
These rates — based on the recommendations of the Commission for Agricultural Costs and Prices — are inclusive of a bonus of Rs 80 a quintal.
“An increase of Rs 160 works out to roughly 16 per cent, which seems high. But, then, the effective procurement price was frozen last year. Moreover, growers have been facing cost escalations on account of farm labour and fertilisers, with the expected upward revision in diesel prices only going to add to their problems. We are, therefore, left with few options,” Krishi Bhawan sources told Business Line .
Wage rate spike
According to data from the Labour Bureau in Shimla, Andhra Pradesh alone has seen farm wage rates — the average for ploughing, sowing, weeding, transplanting and harvesting operations — go up by 40.3 per cent in 2009 and 27.8 per cent in 2010. Similar increases have been reported in other States too.
The same is the case with fertilisers — where a kg of di-ammonium phosphate is now retailing at Rs 12 against Rs 9.35 prior to April 2010.
Apart from paddy, the Ministry has also sought higher MSPs amounting to 17 per cent-plus in kharif oilseeds (soyabean and groundnut), 10-12 per cent in kapas (cotton-seed) and 11.4 per cent in coarse grains (maize jowar and bajra).
In pulses, the hikes recommended are somewhat lower, considering that the MSPs were raised substantially last year (see Table).
The Agriculture Ministry's MSP proposals are slated to be taken by the Cabinet Committee on Economic Affairs (CCEA) in the next few days, the sources added.
With the South-West monsoon setting in in Kerala, sowing activity is expected to gather pace in the weeks ahead.
The CACP while recommending prices takes into account all-important factors such cost of production, change in input prices, input/output price parity, trends in market prices, inter-crop price parity, demand and supply situation, cost of living and international market price. Of all the factors, the cost of production is the most tangible one and it takes into account all operational and fixed demands.