High minimum support prices may distort markets, says ministry

The govt has made it clear that it will not fulfil its electoral promise of minimum 50% returns to farmers over costs

Sayantan Bera
First Published24 Feb 2015
The statement in Parliament comes at a time when the government is considering introducing direct cash transfers in lieu of subsidized  grains under the public distribution system. Photo: Priyanka Parashar/Mint<br />
The statement in Parliament comes at a time when the government is considering introducing direct cash transfers in lieu of subsidized grains under the public distribution system. Photo: Priyanka Parashar/Mint

New Delhi: The government will not buy produce from farmers by paying them 50% more than the cost of production because that might distort markets, the agriculture ministry told the Lok Sabha on Tuesday.

The statement makes it clear that the National Democratic Alliance government, which swept to power in May, will not fulfil its electoral promise of minimum of 50% returns to farmers over costs, as recommended by the National Commission on Farmers (NCF).

“NCF’s recommendation that the minimum support price (MSP) should be at least 50% more than the weighted average cost of production was not accepted by the government as MSP is recommended by Commission for Agricultural Costs and Prices (CACP) on objective criteria, considering a variety of relevant factors,” junior farm minister Mohanbhai Kundaria said in a written statement.

The statement in Parliament comes at a time when the government is considering introducing direct cash transfers in lieu of subsidized grains under the public distribution system. Cash transfer of food subsidy will imply that the government will in future limit its procurement to strategic buffer reserves.

NCF, chaired by scientist M.S. Swaminathan, was constituted in 2004 and submitted its recommendations by 2006. However, the farm ministry said it is implementing other recommendations of NCF and is regularly monitoring the national policy for farmers announced in 2007.

Last year’s hikes in the MSP for rice and wheat, at 3.8% and 3.6%, respectively, has been the lowest in recent years. Overall, farm incomes have been hit hard in the ongoing crop year due to a delayed and deficit monsoon as well as a slump in commodity prices.

The agriculture sector is likely to register a growth of 1.1% during 2014-15, compared with the previous year’s growth rate of 3.7%, show official data released on 9 February.

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