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LATEST NEWS UPDATES | Demonetisation apart, cheaper imports too hit the farm sector -Tejinder Narang

Demonetisation apart, cheaper imports too hit the farm sector -Tejinder Narang

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published Published on Jun 24, 2017   modified Modified on Jun 24, 2017
-The Financial Express

The current agitation of farmers on cereal, oilseeds and vegetables has attracted a lot of analysis with regards to the causes. Many such analyses have converged on low hikes in MSP in the last three-four years as the major cause, and the general public also believes so. Stocking limits, poor warehousing facilities, export bans, lack of a properly developed food processing industry and free trade in commodity exchanges are all proffered as the next lot of key reasons. Some have endorsed the logic that higher production has led to price crash. Another popular rationale being cited is that a cash-squeeze, thanks to demonetisation, has made disposal of produce difficult for farmers. Let us examine some of these factors and their import for farm distress.

The government of the day is being accused of failing to increase MSP “suitably”, thus diminishing profits for farmers. This does not paint the correct picture. Except for wheat and paddy, MSP is a notional value for all other commodities. For wheat and paddy, too, approximately 30% of the produce procured by government, at MSP, and the rest is traded in the market. There is no MSP for onions, potatoes and tomatoes. The short point is only 8% of the total agricultural produce (including horticulture) is supported by public procurement—the rest 92% is sold at market-determined prices. That is why the MP government’s attempt to get all traders to buy agri-commodities at MSP proved futile. After realising its irrationality, the proposal now appears to have been discarded.

For various reasons, whether drought or any other, India’s reliance on import of agri-commodities is rising every year. For instance, annual import of wheat totalling 3-5 million tons (mt), pulses totalling 5-6 mt, and edible oil totalling almost 14 mt have almost become the norm. Recently, import of 0.5 mt of duty-free raw sugar has been authorised. Last year, 0.5 mt of corn import had been permitted. Import prices also have a bearing on domestic prices and the volumes that are traded. Now, market price of wheat in India may also depend on the landed cost of Australian/Ukrainian/Russian wheat.

Similarly, for pulses, prices will be dictated by the landed cost of tur/urad (from Myanmar/ Ethiopia/Tanzania), chana (Australia) and yellow peas (Canada). Soybean prices are influenced by the quotes of the Chicago Board of Trade, imports from Brazil and Argentina. Indonesia/ Malaysia influence palm oil prices in India. Sugar prices will likely fluctuate depending on contracts awarded in the New York and London exchanges. Raw sugar that was 22 cents a pound in November is now at 13 cents/pound in the New York exchange—or down by $235/tonne.

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The Financial Express, 23 June, 2017, http://www.financialexpress.com/economy/demonetisation-apart-cheaper-imports-too-hit-the-farm-sector/731653/


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