The government announcement on minimum support prices for farm produce is keenly awaited. The government has promised to raise the crop MSPs to 150% of the cost of production. Much depends on what is included in the cost of production and how much higher the MSPs will be compared to the prevailing market prices.

But as the accompanying chart shows, the wholesale price index for food articles was lower in May than it was two years ago.

No wonder farmers are a disgruntled lot. WPI for foodgrain, fruits and vegetables, “eggs, meat & fish", condiments, “other food articles" were all lower than they were two years ago. Even the non-food crops such as oilseeds are seeing prices lower than two years ago.

There has been a lot of debate on whether farm prices will go up by much, because the higher crop MSPs may not cover all costs and will therefore be only a bit higher than market prices. But if that happens, it won’t do any good to farmers and the whole point of promising sops to them in an election year will be defeated. On the other hand, there’s the fear of inflation if the MSPs are substantially higher and all the attendant problems that entails, including higher interest rates. The government will have to do a fine balancing act.

Close