India set to reap monsoon bonanza with bumper crop
Sowing of most summer crops has risen higher than normal on the back of good rains, latest government data show, pointing to a plentiful harvest after a devastating twoyear drought.
A good harvest, key to prosperity for half of all Indians, could lift rural incomes for the first time in three years. An improvement in rural incomes is likely to provide a tailwind to the Modi government’s growth agenda by boosting spending on consumer goods.
The area under pulses is nearly 40% higher than the normal, yet another sign that India’s mostly poor farmers respond promptly to policy measures. Pulses, a scarce item, have roiled household budgets over two years because India has had to rely on costly imports.
The increase is mainly because of higher minimum support prices (MSPs) and the government’s decision to build a buffer stock. MSPs, which act as a floor price for farmers, help avoid less-profitable sales when the government builds a buffer by buying the produce.
If a better harvest puts a lid on prices, it may give the new RBI governor legroom to cut interest rates.
“But please remember that food prices may not come down because of higher output alone. Supplyside constraints have to ease too,” said Akash Goel, an economist with Comtrade, a commodities firm.
The area under rice stands at 36.3 million hectares, nearly 4% higher. Coarse cereals, an important source of rural diet, were also 3.5% higher than the normal area.
“A good harvest which looks likely this time across all major food crops does have the potential to generate more income for the farmers that will be spent partly on non-food items,” said Madan Sabnavis, the chief economist with Care Ratings, which tracks the farm economy.
Among food crops, only sugarcane area has ended up lower, which may force India to import the item for the first time in six years.
Prices of the sweetener have already risen 32% in July compared to a year-ago period.
The area under cotton, another crop shrivelled by drought, has also shrunk 11% at 10.2 million hectares currently.
It is raining onions in flood-hit Madhya Pradesh.
The state government, which procured excess onions from farmers at `6 per kg, has now decided to sell them to the poor for `1 per kg.
Farmers in Madhya Pradesh took to onion farming on a large scale last year because of its high price but the bumper crop this year meant no buyers in the open market, forcing the state government to procure the excess crop.
However, the shortage of warehouses meant onions rotting during rains. The government estimated that 3.8 lakh quintals of onions have rotted in absence of adequate storage facilities.
Officials of Madhya Pradesh State Cooperative Marketing Federation (MARKFED), the nodal body for procurement of onions, said the state government had sold just one lakh quintal of the 10.4 lakh quintals of onions till now.
The government first floated a tender for selling the onions, but the response was just 60 paisa per kg. The tender was issued again, but the response didn’t improve much as it got a price between 60 paisa to `1.5.
The government then decided to auction onions at the district level. At a rate of `4 per kg, authorities were able to sell nearly 22,000 quintals. The auction rates were lowered again to `2 per kg, which led to the sale of over 60,000 quintals of onions.
Now, the state government has decided to distribute the remaining onions free of cost among poor families, with `1 to be charged for transportation. This would mean a loss of about `100 crore.
BM Sharma, managing director of MARKFED, said, “Over five lakh quintals of onion are still lying in warehouses. Three days ago, the state government decided to sell onions to people in the BPL category through fair-price shops at the rate of `1 per kg.”