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LATEST NEWS UPDATES | A late call yet again

A late call yet again

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published Published on Jun 21, 2010   modified Modified on Jun 21, 2010

The recent announcement of minimum support prices (MSP) for various Kharif crops has once again called into question certain aspects of the official policy towards agricultural pricing. True to pattern, it has come in late. The monsoon arrived at least a week before, and many farmers might have already chosen the crops to sow. The world over governments through their price support programmes, consisting of assured minimum prices and subsidies, encourage the cultivation of specific crops that are in short supply or are environment friendly. A well thought out programme should guarantee a minimum income for the farmers, and to a large extent, reduce the uncertainty inherent in the market mechanism. Apart from protecting livelihoods, the system has a direct bearing on the availability of food articles to consumers through the public distribution system. The government no doubt takes into account all these factors while framing its policies, but the MSP mechanism can be further refined to fulfil its objectives. Of specific interest is the large hike in the MSPs of the three main Kharif season pulses: urad, tur and mung. This is not surprising as these three have been in short supply for over a year. Their high retail prices have been a significant contributor to food inflation, which remains persistently high. What has pressured the government to act is the fact that these pulses are the main source of protein for a large segment of the population and the high prices are pushing them beyond the reach of the poor.

With large scale imports reportedly not practicable, the government has done the right thing in effecting substantial hikes in the support prices of these pulses. However, for a number of reasons the twin objectives of increasing domestic supply and making the commodities affordable to the consumers may not be achieved. As with practically all agricultural products, the supply chain linking the farmer to the consumer should be fine-tuned in the case of pulses too. The increase in the support price alone therefore cannot immediately enhance the supply of pulses at an affordable price. The support prices might well become a kind of benchmark for private trade to base their price on. In the case of wheat and rice the MSPs have effectively become the procurement prices. There is a strong case for the government agencies to enter the business of procuring pulses and delivering them to consumers through the PDS. If played efficiently, the government's role, both in the procurement and distribution stages, will significantly reinforce the benefits of its agricultural pricing policies.


The Hindu, 21 June, 2010, http://beta.thehindu.com/opinion/editorial/article477675.ece


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