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Charts & Analysis

Chart: Paying Farmers More To Sow Less

In the Mid-Year Analysis, the FinMin has revealed that we have distanced ourselves from reality more than ever. Despite a great monsoon, we might end up seeing prices of food rise, because the area sown, of the Kharif crop, in 2011-12 is mostly lesser than the previous year.

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But the amount of money the government pays – the minimum support price – of the same crops is up substantially, from 7% to as much as 18%.

Essentially, we the taxpayers are paying more for food to farmers who have sown lesser – the price increase is not working as an incentive to produce more. The NREGA may be playing a part (farm labour availability has reduced).

And if you’re wondering, the government has purchased 200% to 300% of the amount of stock needed (of wheat and rice). Much of this rots in our warehouses, and the food subsidy bill is needlessly high. Your taxes hard at work.

  • Siva says:

    Hi Deepak,
    Like every other industry, the cost for cultivation has gone up (salary of agri labor, fertilizer costs, seed cost, diesel for tractors etc). So obviously whether the cultivation area comes down or not, the price of food products will increase.
    Is there any data available for the cost of argi labor, fertilizer, and every other inputs to agri so we can compare raise in input cost to raise in food product price.
    Agriculture is also high risk business, so profit needs to support the risk taken.
    In another 10 years, I’m seeing the possibilities of corporates take over the agriculture and the current land owners will be employees in that. I say this because, you need to do in big scale to bring down the cost and make a good profit.
    Thanks,
    Sivasekar

  • Praveen says:

    Go on to any Naitional/State highway and see huge farm land hads been converted to plots and sold. Nothing is there (no houses) except an border wall around them. Like this lacs of acres which were being cultivated is unuseful now

  • Kshitij says:

    Farming costs have indeed moved up. NREGA is also responsible.
    But more than anything, its the traders who are pushing up prices. Its extraordinary that the govt is helpless even after decades of independence, on simple issues. Their lethargy on food storage is also shocking.
    India’s destiny in 2011 has been decided by onion traders. Seeing them in January, hold the entire country to ransom, everyone else in the business took off, jacking up prices.”Mera number kub ayega?”. So everyone decided to milk the common man.