Fadnavis govt’s proposal to make MSP mandatory may distort market: experts
Mumbai: Maharashtra chief minister Devendra Fadnavis’s plan to prohibit purchase of farm produce below state-set prices is legally not feasible and may distort the market, farm sector experts, activists, government officials and traders of agriculture commodities said.
Last week, Fadnavis told a review meeting that the state government will bring in a law that makes purchase of farm produce below the government-determined minimum support price (MSP) an offence. Fadnavis insisted the legislation would protect farmers but not many share the optimism.
“A state has no powers to make such legislation because MSP is fixed by the Centre. Making MSP mandatory amounts to distorting market when prices are increasingly being determined internationally. MSP itself is a misnomer as not even the government buys the bulk of farm produce except wheat and rice which are part of the public distribution system (PDS),” said a farm sector expert, on condition of anonymity.
Vidarbha-based farm activist and tur cultivator Vijay Jawandhiya said the MSP law was “just an attempt to exploit the sentiment against traders”. “On the one hand, Prime Minister Narendra Modi is talking of a single national market for farmers. And here, Fadnavis is talking about a law to dictate price of a major commodity in a particular state. MSP is guaranteed by the Centre and hence, it is the Centre’s duty to ensure that farm produce is bought at MSP. States only have to help out in procurement,” Jawandhiya said.
He pointed out that the state did not have any legal right to interfere in price fixation because the MSP is fixed by the Centre. “If Fadnavis wants to bring such a law, then Modi should allow states to determine prices of commodities grown in the states,” he said.
The farm sector expert quoted earlier, a former non-official member of the Commission for Agricultural Costs and Prices (CACP), pointed out that the CACP itself has been complaining for years that the Centre fixed MSP for nearly 25 commodities but hardly ensured that farmers get this MSP for any of their produce except wheat and rice. The CACP is an agency under the Union agriculture ministry which recommends the MSP for farm commodities. He said Maharashtra was also thinking about “de-regulating food grains and pulses” from the Agriculture Produce (Marketing and Regulating) Act to allow farmers to sell outside regulated APMC markets. “De-regulating the prices is a good idea but this proposed MSP Act is a contradiction then,” he said, on condition of anonymity.
Experts cite the case of tur procurement in Maharashtra, India’s largest producer, in the current season. The Centre accepted the CACP-recommended MSP of Rs4,625 per quintal but added Rs425 per quintal as bonus, fixing MSP at Rs5,050. Yet, barely 20% of the total yield in Maharashtra or half a million tonnes of tur has been procured by government agencies including National Agriculture Co-operative Marketing Federation (Nafed) at MSP, forcing farmers to sell tur to traders at Rs4,100-4,200 per quintal. Jawandhiya said the MSP provisions included a clause which says that if the government incurs loss due to procurement at MSP which is higher than the market prices, then the Centre and state need to share 50% of the loss each. “But Nafed and state agencies purchase only about 20% even though the Centre had guaranteed MSP,” he said.
Last month, when Tur procurement was in a mess, the government asked traders to purchase the crop at MSP of Rs5,050 which was higher than the market price of Rs4,200.
“It was government’s responsibility to buy tur at MSP, but instead, it asked traders to buy at MSP in Latur. How can the government dictate prices in a particular state when prices are determined on the basis of international market prices? If I am forced to buy at Rs5,050 per quintal in Maharashtra, what price will I get for tur after converting it into edible dal,” Latur-based tur trader and dal mill (pulses processing mill) owner Hukumseth Kalantri asked on phone. He said the retail market was flooded with a tur variety called Lemon Tur imported from Myanmar. “It is selling at Rs37 per kg because it was bought for Rs3,700 per quintal. Now, if I am forced to pay Rs5,050 per quintal, I cannot sell it in retail market for less than Rs60-65 per kg adjusting for the cost of conversion of tur into dal. Who will buy it at Rs65? And who will compensate for my loss?,” Kalantri asked.
Latur in Marathwada is India’s biggest wholesale market of tur and has nearly 100 processing mills. Kalantri said Maharashtra government’s diktat to traders registered with the regulated APMC forced traders to stop procurement for 25 days in April. “Farmers were suffering because no procurement took place because of the government’s diktat. Summer is a wedding season in rural parts and farmers needed money. Procurement resumed only when around 500 tur farmers wrote to APMC to allow them to sell at the prices traders were giving,” Kalantri said.