Re: Indian Agriculture and Agro-based Industry
Posted: 12 Feb 2021 20:53
Anything which is "fixed" ignoring the market sooner or later becomes expensive both for the government and its citizens, be it a currency or lentils or fuel. Imagine if GoI tomorrow fixes a price of petrol at Rs 50 to encourage domestic sales of automobiles , and the international price goes up from $58 to $100/barrel, the government will then be bleeding money. MSP is a support price for farmers, it does little help the food security or the end consumer as we've seen over the last 20 years of chronic high to very high food inflation.
The clear trend of MSP has been it one-directional, you can look at the https://farmer.gov.in/mspstatements.aspx . At the current exchange rate the price per quintal is ~$70 in MSP, just looking at the Canadian markets in the last 10 yrs the wholesale price of red lentils have remained within a narrow band of $25 avg per cwt or about $50/quintal. So the government is picking it up at a 40% premium which is great for the farmers but not so great for the consumers. At the end of the day someone has to foot the bill and no prizes for guessing who that is. A private trader can take advantage of low prices and hedge against high prices but the government has no such leeway.
https://www.bloomberg.com/news/articles ... umper-crop
Avg. lentil prices 10 yr graph https://pasteboard.co/JO1q00l.gif ( i struggle posting images so here's the direct link)
Ofcourse for grain and lentil importers in India, Canada is not the only source. Depending on source and quality red lentils wholesale ranges anywhere from $200 to $600. https://www.alibaba.com/showroom/wholes ... price.html -
Then there is the issue of quality of produce itself which was discussed in detail in the political thread. The MSP purchases are rife with mandi corruption where inedible quality of produce is marked as B grade (common grade) and A grade. A private importer has the control over the choice when it comes to selecting the quality, the government does not care or does not have that luxury because it cannot upset the farmers.
As much as we wish it won't be an electoral matter, the truth is retail inflation is real and has a huge political implication. The biggest reason for UPA's loss in 2014 was not just the daily scams or the abysmal security situation but also the near hyper inflation situation. Retail prices of food tripled and some like lentils quadrupled between 2009 and 2015 increasing the anger in people. The government needs to be careful in balancing MSP and retail food inflation. One only needs to talk to the average man on the street for their opinion about the recent hike in petroleum and cooking gas prices.
The clear trend of MSP has been it one-directional, you can look at the https://farmer.gov.in/mspstatements.aspx . At the current exchange rate the price per quintal is ~$70 in MSP, just looking at the Canadian markets in the last 10 yrs the wholesale price of red lentils have remained within a narrow band of $25 avg per cwt or about $50/quintal. So the government is picking it up at a 40% premium which is great for the farmers but not so great for the consumers. At the end of the day someone has to foot the bill and no prizes for guessing who that is. A private trader can take advantage of low prices and hedge against high prices but the government has no such leeway.
https://www.bloomberg.com/news/articles ... umper-crop
Avg. lentil prices 10 yr graph https://pasteboard.co/JO1q00l.gif ( i struggle posting images so here's the direct link)
Ofcourse for grain and lentil importers in India, Canada is not the only source. Depending on source and quality red lentils wholesale ranges anywhere from $200 to $600. https://www.alibaba.com/showroom/wholes ... price.html -
Then there is the issue of quality of produce itself which was discussed in detail in the political thread. The MSP purchases are rife with mandi corruption where inedible quality of produce is marked as B grade (common grade) and A grade. A private importer has the control over the choice when it comes to selecting the quality, the government does not care or does not have that luxury because it cannot upset the farmers.
As much as we wish it won't be an electoral matter, the truth is retail inflation is real and has a huge political implication. The biggest reason for UPA's loss in 2014 was not just the daily scams or the abysmal security situation but also the near hyper inflation situation. Retail prices of food tripled and some like lentils quadrupled between 2009 and 2015 increasing the anger in people. The government needs to be careful in balancing MSP and retail food inflation. One only needs to talk to the average man on the street for their opinion about the recent hike in petroleum and cooking gas prices.