The government is likely to resume the policy of fixing the minimum support price (MSP) for paddy in order to assure farmers a floor price for their produce.
The government is likely to resume the policy of fixing the minimum support price (MSP) for paddy in order to assure farmers a floor price for their produce. If the MSP scheme is implemented, it will be the first time in almost one and a half decades.
A committee under the Ministry of Agricultural Development (MoAD) has proposed fixing the MSP at Rs 2,013 per quintal for “mota dhan” and at Rs 2,129 per quintal for the “masino” variety of paddy for this season.
The MSP is a form of market intervention by the government to ensure that farmers get reasonable prices for their produce in the event of any sharp fall in farm prices. It is normally announced during the planting season or a month before the harvest on the basis of the recommendations of the MoAD.
The scheme gives farmers a guarantee that they will get a certain amount of money for their produce even if market prices were to fall due to bumper harvests.
If the market price drops below the MSP, the government will buy the farm produce at the rate fixed. Moreover, it discourages middlemen who normally determine market prices.
The Ministry of Commerce and Supplies (MoCS) said it had asked Nepal Food Corporation to submit its paddy procurement working plan including the status of its existing storage capacity and the amount of capital required to implement the scheme.
“We have asked the corporation to submit its detailed working plan to implement the provision and it will be sending its plan to us by Sunday,” said MoCS Spokesperson Deepak Subedi.
He added that after the corporation sends its plan, it will be forwarded to the Finance Ministry for its approval and allocation of the required funds. The proposal has to be endorsed by the Cabinet.
The government had announced, while presenting its policies and programmes to Parliament on June 29, that it would fix reference prices or the MSP for key agricultural products to encourage farmers.
The government has also asked the corporation to be prepared to buy 160,000 tonnes of paddy.
“As per our regular programme, we will be procuring 30 tonnes of paddy in the next fiscal year,” said Nawaraj Upadhyay, deputy general manager of the corporation.
“In case the price of paddy goes below the floor price in the market after the MSP has been announced, the government has to arrange funds to procure paddy from farmers,” he said.
Upadhyay said that the corporation had a capacity to stock 1 million tonnes of paddy and that it was capable of handling the MSP scheme. He added that the government should not delay fixing the MSP as it should be done on time.
Last year, a proposal to fix the MSP had been sent to the Finance Ministry, but it was rejected.
In 2012, the government had announced that it would resume the policy of fixing the minimum price following complaints that middlemen had been determining the market rate. The fixing of the MSP is in line with the recommendations of the government and the directives of former prime minister Baburam Bhattarai.
Reports said that Nepal did not have an effective MSP to influence the supply response in past years. India has been regularly announcing the MSP. In Nepal, the MSP used to be announced intermittently for paddy and wheat until 1999 when this provision was fully abandoned, according to reports.
Even when the MSP was announced, it was not much relevant as it was set well below the projected market price to protect the government from having to buy farm products if prices should tumble.
Moreover, reports said that even when support prices were announced, it was not done before the beginning of the planting season so it did not affect the farmers’ production decision.
Sangam Prasain is Business Editor at The Kathmandu Post, covering tourism, agriculture, mountaineering, aviation, infrastructure and other economic affairs. He joined The Kathmandu Post in October 2009.
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