Indian government raises crop purchases

The Indian government has increased the amount of crops it has bought under its country-wide procurement system, with rice purchases at a record level.

The government purchases crops from farmers at a pre-set value, known as the minimum support price (MSP). The MSP is designed to guarantee farmers' incomes and to encourage the cultivation of certain crops for dietary and sufficiency reasons.

Since the start of this summer's kharif planting season, which runs from April-September, the government had procured 4.25mn t of paddy, or harvested rice, at the MSP as of 11 October, up by 35pc on a year earlier — a record amount, housing and urban affairs minister Hardeep Puri said. In the key crop producing northern state of Punjab, MSP purchases have more than doubled to 2.61mn t, from 740,000t in the same period last year.

The government has also increased the number of procurement centres in the country to purchase the 2020-21 kharif crop to 39,130 from 30,549 a year earlier.

The increased buying follows the government's pledge to fix crop prices to at least a multiple of 1.5 to the average-weighted crop cost of production, as per its 2018-19 budget commitment. Delhi has expanded the MSP system in recent years, with the total number of procurement centres rising to 64,515 in 2019-20, from 48,550 in 2016-17.

India's economic cabinet committee last month approved an increase across the board in MSPs for crops sown in the 2020-21 winter season.

The uptick in MSP crop purchases is to be expected, with robust agricultural fundamentals in India this year. The sown acreage of the most recent kharif crops was up by 2.2pc on the five-year average to 109.5mn hectares (1.1mn km²), according to the agricultural ministry's latest estimate. And farmers are set to reap a record amount once the harvest is complete, with the rice crop projected to total more than 102mn t, the ministry projects.

Fertilizer sales have accordingly boomed this year, with another solid monsoon season encouraging farmer offtake.

By Harry Minihan