Low increase in wheat MSP makes economic sense. Major reform await their political moment

ARs 40 increase in the minimal help worth (MSP) of wheat, to Rs 2,015 per quintal, is the bottom because the Rs 20 hike for the 2009-10 crop. From a purely economic standpoint, this makes sense. At 56.48 million tonnes (mt) as on August 1, public wheat shares stood manner above the 51.33 mt, 43.59 mt, 40.86 mt and 30.06 mt for a similar date of the previous 4 years. Along with 44.46 mt of rice, it provides as much as nearly 101 mt of shares — this, after the file quantum of free/near-free grain distributed below the post-Covid aid bundle. Merely put, there’s an excessive amount of wheat and rice in authorities godowns as we speak. Economic logic dictates that the federal government ought to freeze, if not scale back, the MSPs of each cereals and likewise cap the whole amount procured — ideally, to half of the 103 mt-plus (60 mt rice and 43 mt wheat) purchased from final yr’s crop.

However political compulsions — meeting polls are due in Uttar Pradesh and Punjab — might rule out any main reform of the present MSP procurement regime, which incentivises manufacturing of crops already in surplus and likewise requiring extra water than these (oilseeds and pulses) that the nation considerably imports. One shouldn’t rule out the so-called state suggested worth (SAP) of sugarcane in UP, too, being considerably raised forward of the brand new crushing season from October. On condition that the Congress authorities in Punjab has solely just lately revised its SAP upwards, from Rs 295-310 to Rs 345-360 per quintal, it’s unlikely that the Yogi Adityanath-led BJP administration in UP gained’t comply with go well with. Each UP and Punjab had, apparently, frozen their cane SAPs, after having final elevated them by a paltry Rs 10/quintal (to Rs 315-325 and Rs 295-310, respectively) in the 2017-18 season. Now, with state elections hardly 5 months away, it could be an excessive amount of to count on any rational pricing insurance policies discouraging cultivation of surplus, water-guzzling crops that additionally militate in opposition to dietary diversification; the poor have to devour meals richer in proteins and micronutrients somewhat than mere carbohydrates and sugar.

The much-delayed but vital reforms in Indian agriculture — transferring away from enter and crop MSP subsidies to per-acre/per-farmer transfers, specializing in manufacturing price reductions and investing extra in public farm R&D and infrastructure — are well-known. The Narendra Modi authorities’s farm legal guidelines — which search to finish the monopoly of state-regulated agricultural markets, permit personal gamers to contract immediately with farmers and take away stocking limits on produce — are, little doubt, well-intended. However whether or not in expending an excessive amount of political capital on these legal guidelines, it has boxed itself right into a nook with regard to endeavor the extra substantial reforms stays to be seen. For now, at the very least, that appears to be the case.

This editorial first appeared in the print version on September 10, 2021 below the title ‘Ready for change’.

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