Free up pricing of agriculture

MSP FRAMEWORK NEEDS A REVISIT, IN TERMS OF FREEING UP PRICES OF PRODUCTS AS ALSO MAJOR INPUTS

- ASHOK GULATI

RICING OF AGRICULTURE outputs or inputs is no different from the pricing of other products. In a market economy, they are decided by the free play of demand and supply. Many times governments intervene to control prices, and they often mess up the system leading to huge inefficiencies. That does not mean that governments don't have any role. Their major role should be to make sure that markets work well. And for that, they need to invest in information symmetry and physical infrastructure. They can also invest in facilitating the creation of efficient value chains through institutional innovations that minimise the price spread between farmers and consumers. They can help promote futures markets and options that try to minimise the risk, and help farmers take planting decisions based on what future prices are likely to be rather than basing them on the previous year's prices. This is the forward-looking scenario that will align well with what India chose to be with the 1991 reforms.

If Manmohan Singh will be remembered for one great thing that he did for India, it would be freeing up the industrial policy from the controls and licence raj, freeing up the exchange rate, and gradually reducing import duties and opening up trade. This gave India a new direction. He did not touch agriculture as he thought it was a state subject. The only thing he did was to try to raise urea prices by 30% in one go as he felt that it was absurd to keep them frozen over long periods of time when costs were rising. It was resisted by many in the Congress party, who feared losing their vote base.