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Narendra Modi’s government raised the minimum support price (MSP) for the 2023-24 rice crop by 143 rupees per quintal, as opposed to 100 rupees, 72 rupees, 53 rupees and 65 rupees for the previous four years. One way to see this is through the lens of politics: national elections are barely 10 months away. After all, the average exchange rate for rice increased by as much as 200 rupees/quintal in 2018-19, before the latest Lok Sabha polls. But this time, there are some economic constraints, too. At 72.8 million tons, government stocks of rice (including the mill grain equivalent of rice) and wheat on June 1 were the lowest in six years to this date. Moreover, the southwest monsoon has not been so great so far, with rainfall in India 56 percent lower than the normal historical average during June 1-11. And with the US National Oceanic and Atmospheric Administration announcing the arrival of El Niño, which is expected to gradually increase in winter, one must prepare for the worst.
Simply put, a new agricultural year that begins with khareef planting in June and July doesn’t look all that promising, coming after bountiful harvests from four successive good monsoons (2014, which recorded an overall lack of rainfall of 14 percent, was also an El Niño year). There are enough stocks of cereals, sugar and pulses (especially channa) for the time being. Milk availability has improved significantly from peak shortages seen in February and March, while the market is well supplied by imports of palm, soybean and sunflower oil amid a collapse in world prices. But things can change in the event of an abnormal monsoon affecting khareef acreage and crop yields. If the rains do not adequately fill the irrigation reservoirs and do not recharge the water tables, the effects may extend until the Rabi season. It explains the flurry of decisions in recent months – from a ban on sugar exports to storage restrictions on Arhar and Orad. It is clear that the government does not want to take risks in an election year.
That being the case, a significant increase in MSPs – not only for rice, but also for kharif pulses (mung, aarhar and orad), oilseeds (groundnut and soybean) and cotton – makes economic sense. Announcing them at the right time, before you pick up the sowing, is equally welcome. sends the right signals to farmers; They need the incentive to produce more in today’s situation where domestic supplies of most agricultural commodities are delicately balanced. However, higher MSPs may not help if monsoons are absent. Farmers suffer from low crop prices in most years of abundant production. One hopes that 2023-24 won’t be a year of bargain pricing – with or without MSP – with not much to sell.
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