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It is that time of the year when Krishi Bhavan announces the minimum support price (MSP) for rabi crops such as wheat, pulses (mainly, gram) and oilseeds (mainly, rapeseed/mustard) that are now being planted. There is heightened expectation of a steep increase in MSP for rabi crops on the lines of the 30-50 per cent hike in the MSP for various 2008 kharif season crops. Last time, the announcement of MSP hike came too late for growers to take an informed decision. Such dela ys prevent growers from choosing among planting options. Reports suggest that MSP for wheat may be raised by 8 per cent to a new high of Rs 10,800 a tonne. The Government needs to be circumspect in deciding the MSP. Last year, the 25 percent hike in wheat MSP (a whopping Rs 2,000) to Rs 10,000 a tonne was sought to be justified on the ground of high international prices and rising input costs. The global grain market conditions are vastly different today.

The world is set to harvest an unprecedented 677 million tonnes (up 11 percent) in 2008-09 as a result of which wheat prices have tumbled by half from their peak to the present level of about $ 220-230 a tonne, cost and freight India. Being election season now, the Government may be tempted once again to woo the farm lobby by offering a higher MSP. This is best avoided. Procurement of a record 22 million tonnes of wheat last season may have created a smug feeling in New Delhi about comfortable levels of buffer stocks; but it has come at an enormous cost to the nation in the form of ballooning food subsidy burden. We must remember the lessons from 2001-2003 when the country carried an unreasonable level of foodgrain buffer stocks - at one time over 60 million tons of rice and wheat, which eventually had to be exported at a huge subsidy. While farmers must obtain remunerative prices, a mere hike in MSP is unlikely to improve either production or productivity.

Under Indian conditions, the ability of growers to respond to higher prices by way of higher production is limited. On the other hand, a sharp hike in MSP can push prices further up and defeat policy initiatives to contain food inflation. As for wheat cultivation, except in Punjab which has had excess rainfall when the southwest monsoon withdrew, soil moisture conditions in other major wheat growing states are bordering on the deficient. Krishi Bhawan must work closely with various State governments to maximise crop production. Output of major crops such as pulses, oilseeds and sugarcane declined in kharif 2008 from that of 2007. The country cannot afford a repetition this rabi season.

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