Minimum Fix

What is MSP— the much talked about term these days in Parliament or state assemblies? MSP is a minimum support price for an agricultural product fixed by the Union government at which it is bound to buy any quantity offered by the farmer.
This is fixed by the government based on the recommendation of the Cost and Agricultural Prices Commission (CACP).
But neither these recommendations nor the MSPs carry any weightage until it has the blessing of most powerful politicial parties. Thus, be it the MSP for wheat, sugarcane or cotton, horse trading takes place every year and those having powerful political pull win the race. All these three are highly politicised commodities and no formula can fix a reasonable support price acceptable to all concerned.
Take the example of cotton in Maharashtra. Against all odds, the state government had earlier decided to purchase at MSP and give up its monopoly procurement cotton scheme, but as soon as the winter session of the state assembly met in Nagpur last week the politically powerful cotton lobby in the state has once again succeeded in forcing the state government to raise the procurement price to Rs 2,300 per quintal of kapas.
Under the revised scheme operated since the beginning of the new cotton season, the state was procuring cotton only at support price and with the result the procurement by the state agency was only around 15,000 quintals of kapas as against around 15 lakh quintals by the private sector. The state is expected to produce around 120 lakh quintals of kapas during the current season.
Thus, the state may be forced to buy at least remaining 100 lakh quintals of kapas plus cotton from the neighbouring states as the market price there is lower. This, however, may not boost prices in the other states as Maharashtra, looking at its worst financial crisis, will not be in a position to arrange over Rs 2,500 crore needed for the procurement and may have to stop buying kapas.
The only thing perhaps that helps the state is its decision to pay difference between the support price and Rs 2,300 in two installments after the end of the current year in June ‘03. The state has announced that it will pay the difference in two installments, one in July ‘03 and second in Diwali thereafter. The question is how many farmers will be prepared to wait for the difference for such a long period.
Another reason for prices not going up will be major mill groups will prefer more imports of cotton, if domestic prices are artificially raised by the Maharashtra cotton scheme. This may once again force Maharashtra federation to hold stocks of this season, in addition to the stocks it is still carrying from last season and incurring heavy losses on that.
Similar is the case of UP, where farmers are agitating for higher sugarcane price and again Punjab and Haryana farmers are seeking higher procurement price for wheat. There can be no two opinions on farmers receiving better price for their produce, but raising the support price year-after-year is not the answer. The need is to go in for improved yield through new technology and be competitive in the world market, be it wheat, rice, sugar or cotton.