It will be huge task for the government to implement 23 crops procurement, said Ashok Gulati, chair professor for agriculture at ICRIER.
In an exclusive interview to CNBC-TV18, Gulati said that he is concerned by the large rain deficiency in Saurashtra, Gujarat as cotton sowing has been severely affected there.
Watch the full video here: Minimum support price for 23 crops to bump up inflation, says Ashok Gulati
However, he is happy that Maharashtra's cotton growing areas, Marathwada and Vidharbha, received moderate rainfall this year.
Edited Excerpts: Is July first week too early to worry about this 16 percent deficiency. We understand in July rains on top of 5 percent deficiency in June rains?
It's a little concerning, but not worrying. We have to monitor the situation, but it's not a disaster as yet to declare anything. So, not too much of a worry, there is always a catch up time and these things do happen quite often - certain pockets don't get and certain pockets get better.
Rice is a thing, where we have comfortable stock, so no worry on that account.
The government also on Sunday said that last years record food grain output of 280 million tonnes would be surpassed this year, despite the kind of situation we are seeing with the rainfall up until now. Would you also concur with that view?
It's a little early I would say. Only after the end of August, we can say what the situation is as there is lot of time to catch up.
In any trend, food grain production has to be higher every year in a normal year. If our India Meteorological Department (IMD) still says, it's going to be normal, so let us hope they turn out to be true. I would say 1.5-2 percent increase in grain production every year, that should be it. So, it's not a record or anything, it's a simple trend line.
As of now from your own knowledge, do you think cotton is something you would worry about at all?
Yes. If there is one pocket that is worrying me at present in the entire country is Saurashtra. There is a massive deficiency of almost 70 percent and that is the cotton belt of the country. Luckily in Maharashtra, cotton areas of Marathwada and Vidharbha got rains. So, normally they are the ones where the situation is bad, but this time it's Saurashtra which is bad. Hopefully, they will get rain. However, I will still not put a red flag up.
What is your sense on the new Minimum Support Price (MSP) rates. Is this already the given price - the 50 percent A2 + FL or is it something that will depend on the implementation and that this announcement needn't necessarily mean that this will be the price the consumer will pay?
There could be different interpretations of that. First, it's basically a political price not an economic price. They announced it, but it's not followed up or it's followed up only in those states, where the elections are coming in the next six months.
If you want to really implement a 23 crops procurement, it's going to be a huge task. If you look at last year's MSP and you look at what the prices were during the harvest period or even now, for most of the pulses or most of the oil seeds, prices are 20 percent below the MSP. So, announcing a higher price without a commensurate gearing up of implementation machinery, it's not going to deliver. It will not address the farmer's distress also.
Rice - the system of procurement is in place at least in 5-6 states - Punjab, Haryana, Chhattisgarh, Madhya Pradesh and now even Uttar Pradesh building up some time, Orissa has something. So, that is where I would expect the price to go up and the implication on food subsidy bill, I would count the procurement going anywhere. Last year was 36 million tonnes, I won't be surprised if the procurement goes to 38 -40 million tonnes and food subsidy bill will at least Rs 12000-15000 crore just because of that. So, of all the crops in the consumption basket, you will find rice carries highest weight. So, from that point of view, there will be some bump up on inflation, but other crops will depend upon whether they really implement this MSP policy or not. If they implement, there will be a huge fiscal cost, because they are going to accumulate all the stock and then they don't know how to unload. If they unload at 20 percent lower price, that much somebody has to bear the loss.
What economists have been telling us is that they expect a 50 to 60 basis points impact on CPI. Is that too premature because the market prices may not really rise so much, would you say that or do you think that kind of arithmetic is correct?