New Delhi: After years of surviving on government aid in the form of a price support scheme, cash crops like cotton and pulses need no market intervention this year, thanks to upbeat prices following a record harvest and increased demand.
The price support scheme (PSS), which assures farmers a minimum support price (MSP) at the start of the sowing season, was a norm for agencies such as National Agricultural Cooperative Marketing Federation (Nafed), Cotton Corporation of India (CCI) and state government marketing bodies, but this year, with prices overshooting the MSP, these agencies have refrained from entering the market, say agriculture ministry sources. Adds Sanjeev Chopra, managing director, Nafed, “This year, we are not taking up cotton PSS activities as farmers are getting handsome returns.”
The trend began in 2009-10, as procurement figures indicate. CCI procured 8.9 million bales of cotton in 2008-09, which came down to 5.75 million bales in 2009-10, while Nafed procured 3.3 million bales in 2008-09 and only 500,000 bales in 2009-10. There was no significant procurement in 2010-11 as 90% of cotton production was consumed by the private sector.
In the case of pulses, Nafed, the only central agency for procurement of pulses for more than 30 years, procured 32,565 tonnes in 2009-10 and an estimated 11,000 tonnes in 2010-11. In 2011-12, with prices of most rabi pulses (gram and masoor) ruling above MSP, Nafed is yet to start any price support operations. For jeera, due to stable prices, the government has not carried out any market intervention in the past five years.
CCI data points out that while the government had announced R3,000 per quintal as MSP for a common BB variety of cotton this year, at present the domestic price has crossed R6,400 per quintal. Similarly, in case of other cotton varieties such as Desi and S-6, the current market prices are at R5,800 and R6,850 per quintal, respectively, against an MSP of R2,750 and R2,850 per quintal, respectively.
The government’s third advance estimate released recently indicates that cotton production during 2010-11 is estimated to be 33.9 million bales (1 bale=170 kg) against 23.94 million bales last year. “The market expects cotton output to reach a new high of 4 crore bales next season, as the rally in prices is expected to spur farmers to boost planting,” NCDEX, the country’s second largest commodity exchange, had said in its cotton overview last month.
This is in sharp contrast to 2008, when the government was forced to hike the MSP for common variety of cotton to R3,000 per quintal from R2,200 per quintal, leading to massive procurement by CCI and Nafed across key growing regions, as market prices were far below the MSP.
But this year the story is different.
Farmers, flush with funds, are even able to increase the holding capacity for other crops like jeera. Not surprisingly, jeera prices on April 14 reached a record R3,000 per 20 kg bag — the highest in eight years — in Unjha, Gujarat, the hub of the country’s jeera trade. “Prices are expected to go up further, as farmers will hold on to their stock in the coming months,” says Manu Patel, president, Market Yard Merchant Association, Unjha.
Even in the case of pulses, despite a bumper crop, prices are not expected to dampen, as the increased output will only cover the annual shortfall that is usually met by import of about 2 million tonnes of pulses every year.
Experts say a bumper pulse output of 17.29 million tonnes is expected in 2010-11, against 14.66 million tonnes last year.
All this spells good news for the Indian farmer.
As Ramesh Chand, director, National Centre for Agricultural Economics and Policy Research, says, “Higher farming income will only help farmers get out of the debt trap.”
