Not much use sans reform of MSP–Economic Times

The Centre’s game plan to amend the Essential Commodities Act (ECA), 1955, so as to purposefully encourage private sector investment in storage of food products would come a cropper without root and branch reform of minimum support prices (MSP) and procurement. The high-cost and rather inefficient MSP regime for wheat and paddy is perverse incentive to overproduce, over-procure and overstock far in excess of bufferstock norms. And its overhaul is imperative to unshackle Indian agriculture and dump the cereal bias.


The recently announced reforms in agriculture could save the exchequer thousands of crores in public storage costs annually, and better allocate resources for much-needed investment. Broadly, the idea seeded was the need to shore up better price realisation for farmers with scale economies, more valueaddition and greater investment. Legal changes were proposed to allow farmers to outgrow the rigidities of the Agriculture Produce Marketing Committee Act, sidestep middlemen, and opt for direct sales of produce. Also on the anvil is barrier-free inter-state trade. Further, a legal framework for contract farming is planned, so the buyer can assure a price to the farmer at the time of sowing. The ECA is to be amended to step up private investment in storage. Plus, stock limits are to be imposed only under the most exceptional circumstances. And no such stock limit would apply to processors or value-chain participants. The prices of food items including cereals, edible oils, pulses, onions and potato are to be deregulated. In tandem, MSP needs to be revamped to prevent overproduction, and to nip in the bud distress sales. There is huge scope to leverage private capacity for storing and processing food. Reliable power supply is a key prerequisite.

via Not much use sans reform of MSP

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