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Mainstream, VOL LIX No 12, New Delhi, March 6, 2021

Procure Oilseeds at MSP at Par with wheat for their Self-Sufficiency | Sher Singh Sangwan

Friday 5 March 2021

The unlimited procurement of wheat and rice at MSP by Food Corporation of India (FCI) since 1970 has proved a decisive incentive to farmers in achieving self-sufficiency in cereals. Wheat procurement at MSP is going on in Punjab and Haryana over last 50 years and other states like Madhya Pradesh and Uttar Pradesh have joined in the last 10 years which has given boost to their wheat production. Similarly, the procurement of rice was mainly in the State of Punjab, Andhra Pradesh/ Telangana and Haryana but in recent years, other states like Uttar Pradesh, Chhattisgarh, Bihar and Orissa have also joined, resulting in its higher production., Owing to sustained procurement of rice and wheat at their MSPs, inter alia, their present stock with FCI is more than double of the required buffer, whereas, pulses and oilseeds of about rupees one lakh crore were imported till 2016-17.

Government of India (GOI) has procured pulses and oilseeds at unprecedented level through the National Agricultural Marketing Federation (NAFED) under price support scheme (PSS) since Kharif 2017. These purchases were made in 12 states viz., Rajasthan, Haryana, Andhra Pradesh, Telangana, Karnataka, Maharashtra, Madhya Pradesh, Chhattisgarh, Gujarat, Uttar Pradesh, Orissa and West Bengal. Most of these States were non-beneficiaries of procurement of wheat and rice and it is only after 2017 that MSPs has become known to almost all farmers as revealed during a study in 2018-19. As result, famers of the States have increased acreage under these crops. It is depicted from the production of pulses & oilseeds during last 15 years (Figures 1 & 2).

Figure 1: Trend in Production of Pulses in million tons

FIGURE 1: TREND IN PRODUCTION OF PULSES IN MILLION TONS

Figure 2: Trend in Production of Oilseeds in million tons

FIGURE 2: TREND IN PRODUCTION OF OILSEEDS IN MILLION TONS

As a result of enhanced procurement of pulses, their imports is negligible since 2018-19 which was around 6 million tons in 2016-17 accounting for about Rs30000 crore. It again proves the procurement at MSP as the most effective instrument for farmers. But the increases in oilseed production is not adequate as we are still importing about 15 million tons of vegetable oils & seeds annually accounting for about Rs70000 crore. One of the reasons is the farmers are still apprehending price risk to shift more acreage under oilseeds in wheat growing states of Punjab, Haryana and UP due to limited procurement i.e., 25 % of the production or 25 quintal per farmers under PSS unlike the unlimited procurement of wheat by FCI. To illustrate, two years back, a farmer from Kaithal district, the wheat bowl of Haryana told that they can get more income from mustard than wheat but the uncertainty of total procurement at MSP is holding them back. It is to be noted that Kaithal district has the highest yield of mustard in Haryana at 11 quintals per acre and its gross value at MSP of Rs.4650 in the year 2021 works out Rs 51150 as against Rs 39500 from wheat @1975 per quintals and average yield of 20 quintals. Moreover the cost of production of mustard will be less than wheat. The yield upto 12 quintal per acre has been reported in a few districts of Punjab. If price risk of mustard is neutralized by 100 percent procurement at MSP then many farmers will shift acreage from wheat to mustard production for higher income, despite somewhat higher yield risk in mustard then wheat.

It is well documented that MSP was started as an instrumental variable to achieve desired production. Even procurement at MSP was started by FCI for augmenting cereal stock for PDS and food security. As result, at present, we have excess stocks cereal and similarly self-sufficiency has been achieved in pulses after enhanced procurement since Kharif 2017. The expectation that after 25 percent purchases of oilseeds and pulses by NAFED, the market price will increases has not happened as revealed during our study of 8 states in 2018-19. Therefore, after achieving self -sufficiency in cereal and pulses, GOI should procure 100 per cent of oilseeds and 50 percent of pulses for a few years to boost their production and save about one lakh crore per year in their imports.

 An advocate farmer near Rohtak farmer who was fed up due to distress sale in 2016-17 gave me another hint. “Sir, my friend has a farm in Australia and all his produce is lifted from farm-gate at a minimum guaranteed prices. But he has to get his production plan approved every year before sowing season”. It means agricultural production is not for the sake of farmers alone but for the requirement of the society/ country as a whole. Our farm sizes are small, hence instead of prior approval of each famer’s production plan for all crops; the production of major crops can be regulated by using MSP as an instrumental variable. It may possible, if , before sowing season, procurement at MSP may be assured for 100 percent of oilseeds and 50 percent of pulses; whereas; procurement of wheat and paddy may be rationalized to at least cover all farmers upto 5 acres i.e. 86 percent of all farmers. It can be reviewed as per demand. It may be a no loss situation for GOI in oilseeds, as the market price of mustard has touched upto Rs6000 as against procurement at Rs4425 in 2020. My experience of 40 years in area allocation behaviors of the farmers since 1980s, allow me to state that the enhanced procurement as above may ensure self- sufficiency in oilseeds and maintain the same in pulses along with the cereals with a short span of 3-4 years. It will also result in more optimal use of vital agricultural inputs like fertilizers and water across the country and coverage of more farmers from poor states.

(Author: Dr. Sher Singh Sangwan, was Professor of SBI Chair CRRID, Chandigarh (retd)
Email: drsangwan8[at]gmail.com)

26 February 2021

Annexure in support of graphs/figures

Annexure - 1: Trend in Production of Pulses (in million tons)
Crop 2005-08 2010-13 2015-16 2016-17 2017-18 2018-19 2019-20
Tur 2.71 2.66 2.56 4.87 4.29 3.32 3.75
Gram 5.87 8.25 7.06 9.38 11.38 9.94 10.9
Total Pulses 14.11 17.89 16.32 23.13 25.42 22.08 23.01
Annexure - 2: Trend in Production of Oilseeds (million tons)
Crop 2005-08 2010-13 2015-16 2016-17 2017-18 2018-19 2019-20
G’nut 7.347 6.708 6.733 7.462 9.253 6.727 9.347
Soyabean 9.364 13.205 8.57 13.159 10.933 13.268 12.242
R & M  7.334 7.601 6.797 7.917 8.43 9.256 8.703
Total O’seeds 27.44 31.073 25.251 31.276 31.459 31.522 33.501

Sources for 1 & 2: Ministry of Agriculture and Farmers Welfare, DES
Department of Agriculture, Cooperation and Farmers Welfare
Third Advance Estimates of Production for 2019-20

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