Govt wants end to big MSP hikes for farmers

delhi Updated: Jun 09, 2016 12:19 IST

NEW DELHI: The government could move away from large hikes in support prices for farmers, agriculture minister Radha Mohan Singh hinted on Wednesday, signalling a key farm policy shift aimed at rationalising subsidies and taming inflation.

The minister said some people thought the “only way to shore up farmer income is through minimum support prices”.

“Wrong. This alone won’t do unless farmers diversify their activities into livestock, kitchen gardens, fishery etc. That’s our focus,” Singh said during a freewheeling web chat with farmers.

MSP is the price set by the government for various farm commodities, which helps boost farmer income by acting as a floor price for private traders. Farmers also tend to focus on those crops which fetch higher MSPs.

Since coming to power, the Narendra Modi government has opted for more moderate MSP hikes overall in a bid to tame inflation. Pulses and oilseeds, two scarce items, have been an exception.

The government has repeatedly stressed its aim to rationalise subsidies and ensure that they reach the target group. Over the past two years, the government has cut down on subsidies in two key sectors, food and education.

Higher MSPs directly feed into inflation. Reserve Bank of India (RBI) data shows a 10% MSP hike raises short-term wholesale inflation by 1 percentage point.

RBI governor Raghuram Rajan on Tuesday kept key lending rates unchanged because he said food inflation was still a worry. Singh said more than MSPs, farmers needed better markets.

He also took a swipe at previous Congress-led regimes saying they focused only on raising support prices for farmers.

“When we say we will double farm income, some of our other friends are amazed because they can’t even think of such a possibility. They can’t differentiate between wheat and mud,” he said.

Economists had greeted the Modi government’s Budget 2016-17 announcement of doubling all agricultural income with caution, saying unless adjusted for inflation, it wouldn’t mean much.

Singh said more than MSPs, farmers needed better markets.

“Earlier nobody wanted to deliver. And it was difficult to deliver because those in power could not distinguish between wheat and mud,” he said repeating his barb.

“Ours is a huge country of 1.2 billion people. India is not Italy. I have been to Italy. Its population is similar to Haryana’s,” the minister said. He said he was merely referring to the 60% of the country’s arable land that did not have irrigation.

First Published: Jun 09, 2016 12:19 IST