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5th January 2024 (8 Topics)

India’s MSP policy: The right support


Existing MSP and procurement policy favours only a few crops, creates market distortions. It needs to be corrected.

Policy Discrimination in Minimum Support Prices (MSPs)

  • MSP Discrepancy: MSPs for oilseeds and pulses remain largely on paper, contrasting with rice, wheat, and sugarcane, where the government ensures MSP through procurement or mandatory payments by mills.
  • Actual Market Prices: Mustard and chana are sold below MSP, with mustard at Rs 5,000-5,100 per quintal in Rajasthan and chana at Rs 4,700-4,800 in Maharashtra, compared to their MSPs of Rs 5,650 and Rs 5,440.
  • Impact on Farmers: The policy disparity affects oilseed and pulse farmers, impacting their income and creating a bias in favor of crops with assured MSP mechanisms.

Import Policy Discrepancy

  • Import Duty Disparity: Wheat attracts a 40% import duty, milled rice at 70%, and sugar at 100%, while crude palm, soybean, and sunflower oil, along with most pulses, are imported duty-free.
  • Rising Edible Oil Imports: India's edible oil imports surged from 11.6 mt to 16.5 mt (2013-14 to 2022-23), valued at $16.7 billion, meeting almost two-thirds of domestic consumption, prompting concerns.
  • Government's Stance: The government's current pro-consumer stance has led to increased edible oil imports, impacting domestic oilseed production and self-sufficiency.

Need for Policy Correction and Market-Led Approach

  • Research and Development Gap: Oilseeds and pulses lack research and development attention compared to wheat, rice, or sugarcane, evident in the denial of approval for genetically-modified hybrid mustard and herbicide-resistant soyabean technologies.
  • Market-Led Agriculture Growth: Livestock and horticulture, driven by market forces, have shown significant growth, while the crops sub-sector, influenced by MSP-based distortions, demands policy correction.
  • Per-Acre Income Transfers: Proposes replacing price-based supports, including MSPs and input subsidies, with per-acre income transfers to correct market distortions and promote sustainable agricultural practices.
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