With Sales Prices Falling Short of Kharif MSP, Farmers’ Losses Mount to Rs 1,000 Crore

The national average prices for the month of October this year have been below the MSP for 10 of 14 crops.

The national average prices, according to the government’s own price information network ‘Agmarknet’, for the month of October this year have been below the MSP for 10 of the 14 crops. Credit: Reuters

The government declares a minimum support price (MSP) for 14 kharif crops, which start arriving in the markets in October. The national average prices, according to the government’s own price information network ‘Agmarknet’, for the month of October this year have been below the MSP for 10 of the 14 crops.

 

National average price for 10 kharif crops were lower than the MSP in the month of October
Crop National Average price (in Rs/quintal) MSP (in Rs/quintal) Difference (in Rs/quintal)
Moong (whole) 5,186 6,975 -1,789
Nigerseed 4,150 5,877 -1,727
Sunflower 3,666 5,388 -1,722
Arhar (whole) 4,630 5,675 -1,045
Ragi 2,038 2,897 -859
Urad (whole) 4,798 5,600 -802
Jowar 1,991 2,430 -439
Bajra 1,512 1,950 -438
Soyabean 3,019 3,399 -380
Groundnut 4,555 4,890 -335
Maize 1,703 1,700 3
Paddy 1,918 1,750 168
Cotton 5,505 5,150 355
Seasamum 9,068 6,249 2,819

 

The average price for moong (green gram), for instance, was 25% lower than the MSP. Over seven lakh quintals of moong have already arrived in the market and been sold, on an average, at Rs 1,789 per quintal less than the MSP.

Over 43,000 tonnes of arhar (red gram) have been sold at the average price of Rs 4,630, while the government-announced MSP is Rs 5,675.

Almost 1.5 lakh tonnes of urad (black gram) have been sold at an average price which is Rs 800 per quintal lower than the MSP.

For the month of October, the average prices for the three lentils are not only lower than the MSP for this season, but also lower than the MSP for last season.

 

National average prices below last year’s MSP
Crop National Average price in October 2018 (in Rs/quintal) MSP in 2017-18 (in Rs/quintal) Difference (in Rs/quintal)
Arhar (whole) 4,630 5,450 -820
Urad (whole) 4,798 5,400 -602
Sunflower 3,666 4,100 -434
Moong (whole) 5,186 5,575 -389
Soyabean 3,019 3,050 -31

 

Apart from the lentils, average prices for soyabean and sunflower too have been lower than the MSPs for the last season.

The national average price published by Agmarknet is not a weighted average. Higher or lower average prices in one particular state which supplies only a tiny fraction of the total produce of a particular crop can skew the national average price.

For instance, the national average price of maize, at Rs 1,703, is marginally above Rs 1,700, which is the MSP. But the national average has been pushed up by prices in Nagaland – which accounts only for a minuscule fraction of the total sale of maize in the country – which stood at Rs 5,443, more than three times the MSP.

The average prices in the states that account for over 90% of arrivals in October – Madhya Pradesh, Rajasthan, Karnataka, Maharashtra, Uttar Pradesh and Telangana – have been lower than the MSP. In fact, the average price in these six states was Rs 1,355, Rs 345 per quintal less than the MSP.

 

Maize

MSP– Rs 1,700 per quintal

National average price – Rs 1,703 per quintal

Average price in Nagaland – Rs 5,443 per quintal

Quantity sold in Nagaland – 90 quintal

Average price in major producing states – Rs 1,355 per quintal

 

The Wire compared the national average price with the average prices in the states that account for more than 90% of arrivals in the month of October for each kharif crop.

For most crops, the national average was more or less similar to the average prices in the major producer states. One exception was maize, where higher average prices in Nagaland significantly skewed the national average, as mentioned above.

The national average prices for the three lentils – arhar, moong and urad – too have been skewed. The average prices for the major producing states were lower than the national average price for all three.

The MSP for arhar is Rs 5,675 per quintal. The national average price in October was Rs 4,630. The four states that account for 90% of the arrivals of arhar in October were Madhya Pradesh, Maharashtra, Uttar Pradesh and Karnataka. The average price in these four states was Rs 3,443, almost Rs 1,200 per quintal lower than the national average, and Rs 2,232 (40%) lower than the MSP.

For moong, the national average price was Rs 5,186, as against an MSP of Rs 6,975 per quintal. While the average price in the five states – Karnataka, Rajasthan, Maharashtra, Uttar Pradesh and Madhya Pradesh – that account for over 90% of the total arrivals in the country was Rs 4,557 per quintal – 12% lower than the national average. The average price in these states was 35% lower than the MSP.

The same pattern was repeated in the case of urad. The average price in the six states – Rajasthan, Madhya Pradesh, Uttar Pradesh, Maharashtra, Gujarat and Karnataka – that account for more than 95% of the market arrivals was Rs 3,920 as against the national average price of Rs 4,798 and an MSP of Rs 5,600 per quintal. Thus, more than 95% of the urad produce was sold at an average price which was 30% lower than the MSP.

Even if we stick to the national average price as published by Agmarknet, the prices for only paddy, cotton, maize and seasamum were higher than the MSP in the month of October.

The total loss to farmers in the other ten crops, obtained by multiplying the difference between the national average price and the MSP with the total arrivals for each crop, was Rs 1,003 crore in the month of October.

Losses in soyabean at Rs 542 crores were more than 50% of the total losses. The three lentils accounted for losses of Rs 300 crores if we take the difference between the national average price and the MSP.

 

Farmers lost Rs 1,003 crores in October for the crops where national average prices were lower than the MSP
Crop Difference between national average price and MSP (in Rs/quintal) Total arrival in October (in quintals) Loss (in Rs crores)
Soyabean -380 1,42,61,350 542
Moong (whole) -1,789 7,66,325 137
Urad (whole) -802 14,68,556 118
Bajra -438 17,05,784 75
Groundnut -335 15,36,605 51
Arhar (whole) -1,045 4,33,945 45
Jowar -439 4,79,748 21
Sunflower -1,722 49,246 8
Ragi -859 57,650 5
Nigerseed -1,727 3,200 1
Total 1,003

 

As we have pointed out earlier in this piece, the average prices in states producing more than 90% of these lentils is actually significantly lower than the national average. The losses could thus be even higher.

Siraj Hussain, former agriculture secretary, argues that prices in mandis in districts which produce large quantities will be even lower than the state average. “The price variations even within a state are massive. There are small mandis where some transactions might take place at a higher price and that gets recorded skewing the average. The prices in the mandis where large arrivals are recorded may see lower prices,” he said.

“Agriculture markets are quite imperfect,” Hussain added.

Written by Kabir Agarwal, this article first appeared on The Wire

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