Traders feed on high prices while govt policy starves farmers

NEW DELHI: The Centre may be worried about rising food prices. But from all appearances, India’s one-hectare farmers are still subsidising urban consumers. Farmers in Uttar Pradesh and Madhya Pradesh are even now selling their harvests of cereals, pulses, coarse grains and oilseeds at prices below the MSP.

So, it is highly unlikely that either the Mulayam Singh government in Uttar Pradesh or the BJP government in Madhya Pradesh will attempt to push prices down further despite the Centre’s request.

What’s more, as the ministry of agriculture actively discouraged the production of pulses and oilseeds in India this year by making no increase in their MSP, it is no surprise that the Centre is now faced with a food inflation crisis eight months later. The only crop that got a substantial push (15%) in MSP was wheat due to scare of imports. Even paddy MSP was raised by less than 2%.

In case the Centre takes the final desperate step of shutting down commodity futures, these small growers will have no option but to once again move out of the modern retail market economy and leave their cropping decisions in the laps of gods and their harvests in the hands of middlemen.

Ironically, after getting a stepmotherly treatment from the ministry of agriculture, and bearing the brunt of diesel price hike, this year farmers are faring even worse in the hands of traders. Take rice. The Centre is upset that consumers in Delhi are paying Rs 15 per kg, which is Rs 2 per kg more than last year for rice. But it has forgotten that in more than 150 mandis across India, farmers are unable to sell their paddy for even Rs 5.80 per kg, or MSP.Similarly, tur dal has been a cause of worry because urban consumers are paying Rs 36 per kg, or Rs 4 per kg more than last year.

But the Centre has done little to encourage its production. The ministry of agriculture decided that farmers deserve only a 10 paise per kg increase in the MSP for 2006-07 to Rs 14.10 per kg. Unfortunately, even this rock bottom price is proving elusive to farmers in more than 130 mandis of MP and Maharashtra. Traders are reluctant to come forward due to fear of harassment under the Essential Commodities Act.

In oilseeds, the economic condition of farmers is even more grave because their harvests cannot be retained for self-consumption. Consequently, when cooking oil prices rose by Rs 3-4 per kg and a nervous Centre chopped Customs duty just before the harvest, the real price was paid by the farmers of Madhya Pradesh and Uttar Pradesh. Traders in more than 150 mandis are refusing to pay even Rs 17.15 per kg for this crop.

The upshot of this growing crisis of profits in agriculture, especially in states such as Madhya Pradesh, Andhra and Uttar Pradesh, may well be an increasing disparity between rural and urban incomes. However, instead of ensuring that India becomes more productive in agriculture, the Centre is merely focused on managing market sentiment.