The government's decision to hike the Minimum Support Price for 14 crucial Kharif crops may be well intentioned but isnt well thought out and simply isn't good enough.
The decision affects farmers in poll-bound states - Rajasthan, Madhya Pradesh, and Chhattisgarh along with Maharashtra, Odisha, Karnataka, Uttar Pradesh, and Andhra Pradesh.
Only `33,500 crore was provided for the additional MSP. Going by last year's procurement figures an additional `11,500 crore will be needed. Presumably, procurement in an election year will only be higher. But that would require massive infrastructure upgradation to procure, transport, store and distribute.
In most markets, farmers struggle to get even the MSP on almost all crops except paddy and the rabi wheat. They inevitably sell at much lower prices to private players. States, meanwhile, lack the infrastructure to handle increased procurement, especially with the Centre pushing them to handle purchases based on their own needs.
The lack of distribution channels will be the biggest challenge now, though agencies have begun renting warehouses.
The new MSP may also take prices of domestic produce higher than international rates. Another issue would be that the food processing industry lacks both the fiscal health and the appetite to absorb the expected higher prices.