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Published on: Dec. 28, 2022, 1:30 p.m.
The MSP test
  • India is now an undisputed global agriculture production powerhouse

By Ritwik Sinha. Consulting Editor, Business India

Good things seem to be in store for Indian agriculture in the new year. Scientists at the ICAR-Indian Institute of Wheat and Barley Research (IIWBR) recently projected a record production of wheat in the current crop year. “As per our estimates and experiences, we are hopeful that the country’s wheat production may reach an all-time high this year and go beyond 112 MT,” Gyanendra Singh, IIWBR director commented. This would mark a considerable improvement in the production of wheat over last year’s output of around 106 million tonnes. 

IIWBR’s projection on wheat lends credence to the government’s first advance estimate projection of remarkable growth in crop production in the current year (July to June season). India, now an undisputed global agriculture production powerhouse, is set to touch all-time high production levels in food grains. This will supplement the country’s spectacular horticulture growth story which shows no signs of abating (currently in the vicinity of 335 million tonnes) and will not disappoint the market.

There are, however, diverse challenges, mainly centred around issues like creating a wider MSP portfolio, which many farmer associations are demanding; giving a fresh rejig to the cooperative model of dairy across several agriculture sectors; giving more power to FPOs and Agritech entities; paving the way for a better adoption of sustainable farming, considering the new menace of climate change, etc.

After the failure of the government to implement three farm laws last year which were meant to liberalise agriculture trade practices, speculation is rife pertaining to the kind of structural changes the government may plan to set afoot or consolidate. 

Considering the fact that the government will informally blow the conch for the next general elections (scheduled in 2024) with the 2023 budget, a further display of pro-farmer propensity from it is a foregone conclusion. 

Production projections 

Production projections undoubtedly have their own value: they emphasise the various factors involved in dealing with the critical issue of food security. The departing year has seen a 3 per cent decline in wheat production due to heatwaves in some states, resulting in a 20 per cent spike in wheat and flour prices.

Being a critical crop, this has also added to inflationary trends – a major concern for the government. However, the good news is that output in 2023 is expected to conveniently overshadow the agricultural performance of the previous year.

As per preliminary estimates released in September for the current year, the government has set a record food grain production target of 328 million tonnes (MT), 4 per cent higher than the 315.7 MT output in the previous year. Experts will tell one that a 4 per cent increment in food grain production annually is quite a considerable jump.

Out of the total grain production, rabi crops such as wheat, mustard and chana (gram) will contribute 164.8 MT in the 2022-23 crop year. “The strategies would be to enhance area through inter-cropping, crop diversification, and productivity enhancement by introducing high yield varieties, adoption of suitable agronomic practices in low yielding regions, utilising residual moisture, early sowing and lifesaving irrigation for rabi crops,” an agriculture ministry statement said after the release of the estimate.

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In 2021-22 when total foodgrain production stood at 315.7 MT, major support had come from the record rice harvest of 130.2 MT. Segments like pulses (India still relies on substantial volumes of imports to meet its demand) recorded an increase in production – 27.69 MT in the 2021-22 crop year compared to the estimated 25.46 MT in the corresponding period last year.

According to an estimate of the agriculture ministry, in the non-food grain category, oilseed output increased by over 4 per cent to 37.7 MT and rapeseed/mustard seed production increased by over 15 per cent, touching 11.74 MT. A considerable uptick was witnessed in soybeans (3 per cent) and sugarcane production which reached a record 431.8 MT compared to 405.39 MT in the previous year. 

In the current year where food production is projected to reach the vicinity of 330 million tonnes, the government is expecting record production for crops such as maize, gram (chana), pulses, rapeseed and mustard, oilseeds and also sugarcane. As mentioned above, wheat output is expected to register positive growth while rice production, considering the acreage trends, may witness a marginal fall. 

MSP & other challenges 

While the government is likely to be cushioned by all this foodgrain production growth in 2023, it may face challenges on other fronts cropping up from political quarters. Something that it will not be able to ignore considering the beginning of the countdown for D-Day in 2024. At a time when populism is again rearing its head, some of the key opponents of the ruling BJP are expected to support the voices of those wanting to further strengthen the minimum support price (MSP) regime, expanding its ambit beyond 22 crops.

“The government must make it mandatory that no crop covered under MSP will be sold to anyone below the stated price. A statutory guarantee should be given on this. Furthermore, it should also be extended to cover sectors like dairy. For instance, the price fixed by Amul, the market leader, should be treated as the benchmark for the entire sector. We are going to raise these issues more emphatically in the new year,” says farmer leader Pushpendra Singh, who was a prominent face in the farmer protests against the farm laws proposed in 2020. 

Within the government, however, there does not seem to be much enthusiasm for the proposition to make the agriculture business more MSP-driven. “In my view, MSP is not the best price in all situations. It is definitely a stable price but not the best price. The best price comes from competition. If there is competition in the market, farmers can get the best price,” Niti Aayog member Prof Ramesh Chand commented at a conference in Delhi last week. Prof Chand is also a member of the government-appointed committee on MSP. The committee, formed in July, is examining various modalities to make the MSP system more effective and transparent.

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Among other things, it is also looking into the issue of giving more autonomy to the Commission for Agricultural Costs and Prices (CACP) that fixes the MSP of crops. Also present on the occasion was Prof CSC Sekhar, Professor, Institute of Economic Growth (IEG), and Member, MSP Committee. And he opined no differently on the challenge of responding to new MSP-oriented demands. “It is quite complicated. The issue merits three considerations: economic, administrative and judicial feasibility.”

To buttress his point, he referred to a study conducted by IEG in 2019-20 covering five cereals, five pulses and four oilseeds. “What we found was that if MSP was legalised for these 14 crops, the expenditure would be approximately Rs3,40,000 crore per annum. Food subsidies would have to be nearly doubled,” he underlined. 

On the agriculture and allied sectors front, the new year could also be marked by moves meant to consolidate the cooperative movement. A dedicated Ministry of Cooperation was formed last year which is being spearheaded by Amit Shah and according to observers, it has been formed to give a fresh boost to the cooperative structure in the country and further endear the current government to its rural constituency.

The country is currently estimated to have 8 lakh cooperative entities with which 32 crore workers are directly or indirectly involved. A substantial volume of cooperatives involved in agriculture and allied businesses like dairy benefit the rural population. The success of an entity like Amul has proved that cooperatives have game-changing capabilities.

“Since independence, the country’s milk output has grown by 13 times (17 million litres to 210 million litres). It has grown very fast, especially after 1974, after the cooperative movement took firm root in the sector,” points out RS Sodhi, Amul’s Managing Director. 

The government is clearly in the mood to harness this route further as the clarion call of Prime Minister Narendra Modi – ‘Sahkarita se Samridhi’ (cooperative leading to prosperity) – demonstrates. The creation of a Ministry of Cooperatives was a marked step in this direction and has been given a further push by the introduction of the Multi-State Co-operative Societies (Amendment) Bill-2022 early this month in parliament. The key highlight of the bill is the proposal to allow the merger of any cooperative society into an existing multistate cooperative society.

As per the existing two decades-old law, only multistate cooperative societies can amalgamate themselves and form a new multistate cooperative society. “In a large country spread from Kashmir to Kanyakumari, if we have a strong cooperative movement that moves with one mood, one tone, then all states must ensure they are on the same path. They need to formulate one common thought,” Amit Shah had said earlier.

  • The government must make it mandatory that no crop covered under MSP will be sold to anyone below the stated price. A statutory guarantee should be given on this

The bill has, however, been referred to a joint committee of parliament after staunch opposition from some Congress members that it would dilute state governments’ rights in the governance of cooperatives. The committee has been urged to expeditiously look into the concerns of some members and present its report before the end of the budget session. The buzz within government circles is that the government is keen to implement the bill next year since it can be presented as a major step for farmers and stakeholders in other allied businesses in rural India. 

 Other possible trends

Those in the agri-input business are also hoping for some fresh incentives provided to grassroot stakeholders for switching over to technology-driven modalities. “Government has been promoting the usage of technology in the agriculture sector in a big way over the last few years. Needless to say, the adoption of precision farming and sustainable agriculture practices will go a long way in enhancing crop yield, lowering cost, and improving soil conditions. The adoption and implementation of best practices needs to be hastened and towards this end, it would be imperative for the Government to provide some financial incentive to farmers, which will encourage them to embrace technology,” says RG Agarwal, Chairman, Dhanuka Agritech. 

Meanwhile, start-up entities helping farmers through knowledge sharing, creating more market linkages as well as facilitating easy finance for them, are expected to give a further push to scale up their operations. Many observers believe the Indian agriculture market will be inundated with new technological applications to encourage sustainable practices as well as adding more efficiency to its operations.

“With the world population hitting the 8-billion mark, a quarter of whom are dependent on small-holder farmers, food security is a ‘now’ problem. This is where climate-smart deep-tech enabled solutions have a tremendous and measurable impact,” points out Ravindra S Dolare, Head Ecofrost, Ecozen Solutions, a Pune based technological start-up which is also working in the area of creating solar-based cold chain systems. Quite clearly, defining innovations making headway in the Indian agriculture sphere could also be a hallmark of 2023.

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