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Wednesday, 11 July 2018

MSP hike to increase global price of cotton, rice

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CHANDIGARH: The hike in the minimum support price (MSP) of kharif crops announced by the Narendra Modi-led government is all set to impact international price of rice and cotton—items topping list of agricultural commodities exported from the country. The hike is expected to firm up cotton prices in India, largest exporter of natural fibre, and reflect in global market soon, feel traders. 
 

To fulfill its commitment of supplementing farmers’ income and address rising distress among farmers, the government on Wednesday announced an increase in MSP of 14 crops sown in the summer season. Among these crops were paddy and cotton that saw a hike of 13 per cent and 28 per cent respectively. 
MSP is a direct market intervention by the government to check distress sale by guaranteeing a fixed price in event of fall in price in open market. The prices are announced before each summer and winter cropping season. 

The increase in common rice and grade-A quality of the cereal will impact international price before reflecting in the domestic prices, feel exporters. 

“The MSP of paddy will show its impact on international price of non-basmati as well as basmati rice by the next month, when global export deals are struck,” president All India Rice Exporters Association Vijay Sethia told ET. 

India accounts for almost one-third of the global rice trade and so far, it has exported around 14 million tonnes of rice in the current year. Although MSP covers just normal rice, it will push up price of basmati rice as well, exporters claim. 
Sethia said that the higher assured price under MSP for paddy will encourage farmers to grow normal rice instead of basmati from next year in the country. “The price of basmati will have to increase or farmers will lose interest in growing the premium rice,” Sethia said. 

Traders of cotton, another major export commodity, said that the MSP will check cotton exports from India and ensure domestic supply during current season. “The substantial increase in the price of cotton is expected to activate multi- national companies in domestic market as exports of raw cotton will be unviable now,” cotton trader said. 

India is leading global trader in rice with exports over 12 million tonnes including 4 million tonnes of basmati rice from the country. “With exports likely to dampen, the Cotton traders including multi-national firms are expected to remain active in domestic market,” an analyst said. 

Exporters of cotton yarn and textile from India expressed concern over losing low cost advantage in raw cotton as cotton prices had remained subdued in the last few months compared to global market. “Government could benefit farmers by directly paying the difference of amount between MSP and market price,” IJ Dhuria, director, (raw materials) Vardhman Textiles said.He said that the hike would distort market for yarn and textile industry. 

Farm activists find the MSP short of expectation. "The increase is highly inadequate and an eye wash as the increase in MSP will hardly improve income of farmers given the spike in price of diesel, higher taxes on fertilizers, farm equipment and rising cost of cultivation,” lamented president Bhartiya Kisan Union Balbir Singh Rajewal. He said that the MSP is calculated on basis of costs incurred in the previous year and fail to incorporate rise in expenditure in the current year. 

Despite the higher MSP, the government need to strengthen the procurement infrastructure in states like Bihar and Uttar Pradesh where grain purchase is dominated by private players and remuneration is much less than the assured price. “At present large quantity of food grain from UP and Bihar comes for public procurement in states like Haryana and Punjab,” a trader said. 

The increase in MSP will increase acreage under paddy, a crop that require substantial quantity of groundwater for irrigation. “Over 3,000 litre water is required to produce one kilogram of normal rice while basmati require less water,” an agriculture scientist said. 

 


Source: https://economictimes.indiatimes.com

    
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