Call for Minimum Farmgate Price for Pusa 1121 Rice by Prabha Jagannathan

Punjab and Haryana have asked the government to declare a minimum farmgate price for the Pusa 1121 variety of basmati in order to protect farmers from price fluctuations. This is the first time that such a demand has been raised for basmati. The proposed farmgate price is similar to the government support price declared for key crops to protect interests of growers. The request that the government declare a minimum farmgate price and link the minimum export price (MEP) to it was made at a preparatory meeting by officials of the Commission for Agriculture Costs and Prices, state government and farmer group representatives in New Delhi over the weekend.

The move highlights the feeling that exporters often shortchange Pusa 1121 farmers on a proportionate farmgate price, despite the variety fetching record prices in the export market. Citing volatility in prices (anywhere between $900 a tonne and $1,600 a tonne) over the last few years for the modern basmati variety, representatives at the meeting in fact stopped just short of a minimum support price (MSP).

“The suggestion was more on the lines of a declared support that traders should mandatorily pay in any year, irrespective of price volatility,” an official who attended the meeting said.

With falling water tables, the area under Pusa 1121, which reportedly uses less water, has been growing rapidly and the variety now accounts for 50% of the total exports. On an average, the variety fetches 35-45% higher price than the average rice varieties even in the worst of times.

 

In 2009-10 rice sowing year, an estimated 1 million hectare was under the Pusa 1121 variety in Punjab and Haryana alone, which was more than twice the area in the previous year. With a total crop size of 5 million tonne, full-grain rice production averaged 2.4 million tonne to 2.5 million tonne. At present, the variety fetches around $950 a tonne in the export market and despite the political turmoil in the key West Asian market, traders and exporters see no drop in exports. “Exports may get a little delayed, but the average exports will remain around 1 million tonne to 1.2 million tonne,” Karan Chanana of Amira Foods said.

Although some sections of the All India Rice Exporters Association have been known to acknowledge that exporters exploit farmers at times, the organisation would not comment on the issue of making a minimum farmgate price mandatory for popular export varieties, such as Pusa 1121, and linking this to the MEP.

However, an official acknowledged, “It is true that at the current $900 a tonne MEP, minimum farmgate price would work out to around . 21 a kg. But the exporter’s price could be as high as . 40 a kg. The problem is farmers want Pusa 1121 to fetch the peak price of $1,650 a tonne every year. That’s not possible and the exporter takes the risk of political, logistical, phytosanitary and other threats to his trade by himself, after he has paid the farmer for his produce to supplycontracted exports.