MSP hike may lead to food inflation

The  recent hike in the minimum support price (MSP) of 14 Kharif crops and  decline in the sowing of summer crops mainly paddy in many parts of the country, may push food inflation in the coming days.  Vegetable, fruits and pulse prices have already started soaring due to monsoon. The full inflationary impact will be visible only after the agencies start procurement of crops.

According to latest kharif crop sowing, the planting was taken up on around 502 lakh hectares as against 557 lakh hectares covered during the same period last season. The area under rice cultivation is around 116.92 lakh hectare as compared to 126.92 lakh hectare last year.

This means rice cultivation this year is lower to eight percent as compared to same week last year. Oil seeds, as a whole, are still 13.42 per cent lower at 63.59 lakh hectare as compared to last year. Similary, the area under cultivation of pulses is less than 10 per cent this year as compared to last year.

According to Agriculture Ministry, the inflationary impact will only be felt once the shortfall in sowing translates into a deficient yield when kharif crops are harvested.  “The mixed trend in food inflation in June presents a hazy picture”, said officials of the ministry. According to the Central Statistics Office data, consumer price inflation stood at 5 percent in June, compared with 4.87 percent in May.

All India Kisan Mahasangh’s CEO Binod Pandey said that increase of MSP of maize and soyabean may push up input costs of poultry and livestock. “This will lead to increase cost of milk, milk products, chicken and high quality mutton in the country. After the MSP, input cost would be increased and this will lead to food inflation,” he added.

All India Kisan Coordination Committee’s VM Singh said the cost of inputs like diesel, fertilizers and electricity are being increased rapidly, particularly diesel on daily basis. “The big companies are selling seeds and other inputs at very high rates.  The prices of diesel, fertilizers and electricity should be under the control to keep food prices in check,” Singh added.

Several studies after hike in MSP have indicated that it would lead to inflation in the coming days. Due to monsoon, prices of vegetables and fruits already started soaring across the country. Once the procurement of Maize and Soyabean start, it will lead to hike in livestock, milk and milk products.

The monsoons have made a delayed push towards the northwest part of the country, picking up pace in the recent weeks. Of the 36 sub-divisions that the country is divided into, seven have received excess rainfall, while 17 recorded normal rainfall.

However, 11 sub-sections had deficient levels of precipitation and one received scanty rainfall. Most regions in the Gangetic plain have had deficient rainfall, with large swathes of farmland in Uttar Pradesh, Bihar and Madhya Pradesh reeling under a prolonged dry spell, halfway through the monsoon season.