Sunday, November 27, 2011

Big gap exist between MSP & MRP

Manohar Manoj

In India the existence of food inflation is not due to hike in MSP rather due to higher MRP of all food items. There is huge gap between minimum and maximum price which ranges between 50 percent to 500 percent.


Minimum support price (MSP) for wheat, to be marketed in 2012-13, has been increased to Rs 1,285, an increase of 14.7 per cent (by Rs 165 a quintal) over last year’s MSP. “The MSP of barley has been fixed at Rs 980 per quintal, up 25.6 per cent (by Rs 200) from last year,”.
The MSP of gram has been fixed at Rs 2,800 per quintal, a 33.34 per cent hike (of Rs 700) over last year; while that for lentil (masur) has been fixed at Rs 2,800 a quintal, up 24.4 per cent (by Rs 550) over last year. The MSP for rapeseed/mustard is Rs 2,500 a quintal, up 35 per cent (by Rs 650); while that for safflower has been fixed at Rs 2,500 a quintal, up 38.8 per cent.
This increase was termed by English media as inflationary, the high going food inflation will be further aggravated by this decision, they say. They do not the know the actual position of Indian’s food market comprised of all cereals, pulses, oil seeds,vegetables& fruits. In India the existence of food inflation is not due to hike in MSP rather due to higher MRP of all food items. There is huge gap between minimum and maximum price which ranges between 50 percent to 500 percent. In fact in India the minimum support price does not include the costs whenver the maximum price consists of huge profit surplus. If we do not give a better and cost plus prices to the farmers, it will badly affect the supply chain of the food items which will ultimately check the inflationary pressure over the food market.
But in this circumstances, UPA is all set to present Food security act in the monsoon session of parliament. According to UPA Chairperson Smt. Sonia Gandhi, mentor behind this bill, all BPL family members will get about 35 KG of food grains at the rate of Rs. 2 per KG wheat and Rs. 3 Per KG rice. According to her it will ensure food security to almost all poor people of the country. The makers of this policy are of the view that it will give a great edge to UPA just like MNREGA, a job guarantee scheme in rural area. They also think there would be no point other than food security act for them to face next Lok Sabha elections, because this government is seriously surrounded with the issue like corruption and price rise. And financially this act will cost around l, 00,000 crore to the nation's kitty.
The irony is that the present UPA government which is facing several charges related to the issues of corruption and food inflation, this food security act will further start a new vista of corruption and food inflation both, take it guaranteed. After initial opposition by Prime Minister Manmohan Singh and his expert team of economists ultimately this bill has been forcibly brought out only because it will likely to give a big political advantage to the UPA.
Because in most of state government the scheme of cheap food distribution scheme have brought victory to them, in the same line Central government is thinking. So on the most occasion, Mr. Sharad Pawar who gives generally nonsense statement, have now rightly opposed this food security bill. In stead he has pleaded for the direct transfer of food subsidy to the poor consumers.
Food security act will bring great imbalances over the economy in general and agronomy in particular. The government which is trying to wipe out all subsidies through allowing market forces to operate or transferring subsidies directly to the needy ones, is again erecting a big sand palace of subsidies. Our present public distribution system is already crippled with corruption which is consuming around 50 thousand crores of rupees. The whole food administration comprised of minimum support price, procurement of food grains and its storage in FCI go downs and it’s distribution through PDS are so faulty and subsidy consuming, the furthering of this system will make it a big den of corruption. The second point is that our consumers whether living in urban area or rural area, they want their consumption as per their choice, not by force. The demand and supply forces of whole food distribution will be completely misshaped. The double chain of food supply will bring great imbalances over the food market and post farm management.
The existing PDS system and FCI have already become subject to be scrapped, because it is doing nothing. First it is growing the burden of huge subsidy on the public treasury. Secondly it is not paying better remunerative price to the farmers, so they could get great incentive for better cultivation and can ensure consistent and regular supply of all food items over the longer period of time. Thirdly the existing system is promoting black-marketing because of double supply system. Fourthly it is killing the choice of consumers.
We should not forget still large chunk of subsidized food grains are being distributed through PDS and as mentioned above 50 thousands crore rupee being spent over that, now it is being given a greater ambit. If Mr. Pawar is saying this food subsidy should be given directly to the farmers in stead of distributing via red card or yellow card. There is nothing wrong it it. Govt. must enhance the purchasing power of poor people so that they can purchase it according to their own choice. Govt. can do only one thing that is to raise the wages of MNREGA worker, agriculture worker, the daily wage earner so that have enough purchasing power to spend as per their will. The fact is that despite the existence of PDS, poor do not want to waste their time on making different food cards and wait for food to come in PDS shop, in the meantime they prefer to purchase their food items in open market.
Second thing is that a PDS dealer gets a very meager amount for his commission;they pay supply inspector a fix amount of money also. despite this they do not want to loose PDS dealership, why? It clearly means they sell their food items in open market and thus corruption generates out of it. The third point which is very important, the poor food consumer are food producer also. We talk about interest of consumers, but we do not talk about interest of farmers. Why? If parallel supply system will continue, farmer's produce will become cheaper in market. We already are facing food inflation in the economy. It is happening because we do not have minimum and maximum price cap for all food items.
A million dollar question is ,despite huge food inflation, why are farmers not getting better remunerative price for their produce. During the harvesting season almost all agriculture produces are become completely underpriced. These are sold even lower than MSP, the rate which is decided by government to ensure to check the further fallibility of price at the harvesting season. MSP is always criticized that it does not cover real cost of the production. Despite of this, in many parts of country because of the absence of FCI network, farmers are compelled to sell their produce at very minimal rate. This is the fundamental reason why our farmers are not getting better incentive to produce more. If in a year any particular agriculture items becomes costly, farmers get motivated to grow more, but
next year govt. does not ensure a fix price of it, resultantly prices getting down and down and in the subsequent year farmers get disappointed.
On the whole the food security act will act as antidote for the farming community and the whole food supply system will get hampered because of duality of price. Ultimately this act will consume a huge amount of subsidy and thus the non plan expenditure will go up skyrocket tingly high. One should be clear in their mind that food subsidy is neither an agriculture subsidy nor a part of it, rather it fuse the open market benefit of agriculture. We should know this fact that our agriculture is going on minus subsidy term. It means our farmers are not getting even their actual cost of production.
We are not saying that PDS should be totally scrapped. It is relevant for the places where natural calamities take place. It is relevant in the tribal areas, hilly area, desert areas. Here it will definitely help in providing supply chain of food grain items. It can be utilized in the war zone area; it can be utilized for ensuring no starvation. It should be utilized for any kind of casualty for any family living in rural areas. And these areas can be given subsidy. But these areas would hardly constitute even 10 percent of existing food subsidy, so it will serve a huge amount of subsidy, which can be spent in raising the productivity and purchasing power of both farmers and rural laborers.
Thirdly it will smoothen the market forces and leave the choice over the consumers. It will resist huge amount of corruption. When sugar was decontrolled, we never faced scarcity of sugar. At present both producer and consumer are happy in respect of sugar. But now we are again entering in the controlled regime so far food grain is concerned. It will create lots of problem for producer and consumer as well as the government kitty. qqq

फ़ूड सिक्यूरिटी