Hiking MSPs distorts agri market: official

A senior Finance Ministry official has slammed a key plank of the government’s agriculture policy, saying that raising minimum support prices (MSP) for major crops causes distortions in the agriculture market. This leads to a vicious cycle of oversupply of such crops and a crash in market prices, said the official, adding that cash transfers are a better strategy than increased MSPs. The Centre’s 2018 decision to hike MSPs for all major crops to 50% more than the cost of production is a major element of the National Democratic Alliance government’s strategy for the agriculture sector; it has also featured prominently in the BJP’s political messaging to the farming community at a time of agricultural distress. In the run-up to the last Lok Sabha elections in 2014, the BJP had promised to hike MSPs to 1.5 times the cost of production in accordance with the M.S. Swaminathan Commission’s recommendations. It claimed to have fulfilled that promise in 2018, although there have been disputes regarding the formula used to calculate production costs. The official said increasing MSPs affects cropping patterns as it becomes the basis for farmers to make choices on which crops to sow. In a sector marked by high levels of uncertainty, higher MSPs backed by guaranteed procurement offer the farmer a chance to significantly reduce risk. The officialsaid farmers over-invest in such crops, leading to a vicious cycle of over-supply, crashing prices, and increased government intervention and procurement, with burgeoning stocks then leading to a further fall in prices.

Source  : https://www.thehindu.com/todays-paper/tp-national/hiking-msps-distorts-agri-market-official/article26198784.ece

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