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Survey moots changes in MSP policy

The government has mooted reformulation of the agricultural pricing framework if the present situation of alarming surplus in foodgrains continues to persist along with 20-60 per cent growth in food credit.

The Economic Survey released today links the rise in minimum support price for wheat and common rice by 5-20 per cent during the previous decade to the huge food credit of Rs 517.63 billion, this year.

Compared to the buffer stock norm of 16.8 million tones for January 1 this year, the stock position at 58 million tonnes was way above what the market or public distribution system could absorb.

"If the surplus situation persists because of higher MSP and inability of the domestic market to adjust to each year's change in MSP, there may be a need to reformulate the agricultural price support policy framework," the survey said.

Policy steps should be directed to resolve the problems of excess stocks, tackle the problem of acute shortage of storage space, avoid the increasing carrying cost of stocks and ensure the effectiveness of the price support measures for the farmers.

It expresses concern over the rising economic cost of wheat and rice to Rs 839 and Rs 1174 per quintal this year compared to Rs 391 and 497 per quintal in 1991-92.

Higher procurement prices invariably edge out private trade thus causing Food Corporation of India to procure more than what is required for food security.

Low volumes of foodgrains available with private trade leads to higher market price during lean season due to lesser supply in the market while public stocks lie unutilised in government godowns due to poor offtake.


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