Not a Smart Hike: Challenges with MSP Increase for Wheat
Recent MSP Hike
The Centre recently announced a minimum support price (MSP) of Rs 2,425 per quintal for the 2024-25 wheat crop. While the move may seem beneficial for farmers at first glance, it raises several concerns and potential drawbacks.
Possible Justifications for the Hike
- Depleted Stocks: A key reason cited for the MSP hike is a decline in wheat stocks in public godowns, which stood at 23.78 million tonnes (mt) on October 1. Though this is above the minimum required level of 20.52 mt, it does not seem to justify a significant hike. Additionally, rice stocks are at their highest level for this time of year, making the depletion of wheat stocks less alarming.
- High Open Market Prices: Wheat prices in Delhi have crossed Rs 2,800/quintal, leading to the assumption that higher prices may incentivize more sowing. However, if farmers are already receiving good market prices, increasing the MSP might not be necessary.
Drawbacks of Raising MSP
- Global Competitiveness: An MSP hike makes Indian wheat uncompetitive on the global market. For example, Russian wheat is currently priced at $240 per tonne. Even with additional ocean freight costs, the landed price in India would still be lower than the new MSP, making Indian wheat more expensive.
- Inflationary Pressures: The hike could also contribute to domestic inflation, as higher prices may be passed on to consumers. Despite measures like export bans and stocking limits, wheat prices have increased by 10% compared to last year, indicating inefficiencies in managing supply.
Structural Issues in Agriculture
The focus on MSP diverts attention from improving yields and reducing costs, which are more sustainable ways to increase farm incomes. Yields for key crops like mustard and wheat remain low, especially outside of high-producing regions like Punjab and Haryana.
Way Forward
India needs to prioritize long-term investments in improving crop yields. This can be achieved through better breeding for high-yield varieties, improving water and nutrient efficiency, and developing crops that are resistant to heat, pests, and diseases. Instead of relying on MSP hikes, the government should focus on sustainable agricultural practices to ensure long-term growth.
हिन्दी