Last Updated : 03 December 2012 at 14:50 IST
As the election year is just a stone's throw away from this place in time, nothing else may well explain the new-found-love for farmers by government.
As the election year is just a stone's throw away from this place in time, nothing else may well explain the new-found-love for farmers by government.
What else could explain the Cabinet Committee on Economic Affairs directive to Commission for Agricultural Costs and Prices (CACP) to go back to the drawing board and come out with 'new MSP' for wheat. Or P. Chidambaram's exhortation that RBI allow new banks and also engage in rate cuts.
Wooing the farmers
CACP “was set up in January, 1965 to advise the Government on price policy of major agricultural commodities with a view to evolving a balance and integrated price structure in the perspective of the overall needs of the economy and with due regard to the interests of the producer and the consumer.” according to the website of the Commission.
From cost of production to changes in input prices, the CACP considers a slew of factors—twelve to be precise-- before it arrives at a decision on MSP.
The CACP had recommended that MSP for wheat in current year should be maintained at Rs 1,285 in spite of the production cost climbing up from Rs 927 per quintal in 2011-12 to Rs 1,128 in the current year.
"The CACP recommendation has not been accepted by us," said Sharad Pawar, India’s agriculture minister recently adding the expert panel has been asked to "go in-depth" into input costs like fertiliser, oil and labour charges in submitting a revised proposal. "In next 15 days, we will announce the final price (for current year)," he said and was quoted by The Business Standard as saying.
The MSP for wheat in 2010-11 was Rs 1,120 per quintal when compared to the cost of production at Rs 826. Sharad Pawar seems to be asking for a proportional rise.
But, “the Commission expects that in RMS 2013-14 there will be a large excess supply of cereals, especially wheat, which cannot be fully consumed at home and the Government will find it challenging to store safely or export. Given this situation, the Commission recommends freezing the MSP of wheat and barley at the 2012-13 levels, i.e., Rs 1285/quintal for wheat and Rs 980/quintal for barley , while keeping their exports open. It is anticipated that with exports of wheat picking momentum, the domestic wheat prices will take a lift and farmers will stand to benefit from that.”
The logic of the commission is self-evident. Let the markets decide the course of price! Also the government has approved of unrestricted wheat, rice exports. This being the case why the government has sent back the commission to the drawing board?
Answer: election to the Parliament due in 2014! Only the common man or the 'aam aadmi' could save the UPA II from a mishap now. And what better way to woo them than by dangling subsidies.
The commission to its credit has stuck to its earlier stand of not raising wheat MSP but has proposed a bonus of Rs 40/quintal if the Centre is ready to offload 15 million tons of the grain from its godowns.
It is in light of the fact that additional bonus would enhance procurement to such a degree that no grains would be available in the open market. It would put some additional pressure on storage systems.
Wooing the industry
While the Agriculture Minister is seeking to woo farmers from one side, through the other, the Finance Minister of India is trying to talk tough to RBI and woo industry captains.
Palaniyappan Chidambaram wants the RBI to cut lending rates and help the industrial activity thrive; being a minister, he cannot admit that the so-called policy-paralysis had helped the industry to proceed 'well' in the past three years and more.
“Growth is as much a challenge as inflation. If government has to walk alone to face the challenge of growth, then we will walk alone.” Chidambaram said after RBI refused change the repo rates in November
He also wants the RBI to issue new licenses for banks.
Last week RBI governor was asked by the minister to kick start the process of issuing new banking licences. But the governor said it would be not possible without fulfilling the certain conditions, amendment to the Banking Regulation Act.
"Let me emphasise that the three powers that RBI want are already there with the RBI. It is already there in the regulation; it is there in the powers to grant the banking licences. I am sure the RBI acknowledges and appreciates the well-considered position of the Government and will take the process forward," Chidamabaram said.
As the volleys continue unabated, the 'aam aadmi' is the ultimate causality; whom both ministers are trying hard to woo!
The methods followed by ministers are tried and tested and lacking depth and integrity, would fail!
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