This is a cause for concern, and if not checked, it may keep on raising the burden of food subsidy. Measures to economise on costs by FCI need to be highlighted. 5.44 Very often, especially during the lean season, Government resorts to open market sale by releasing foodgrains from FCI s stocks so as to check speculative rise in free market Consequently, MSP after inclusion of state taxes and procurement incidentals etc. becomes a benchmark price for the free market. The second impact is seen in public agencies such as FCI procuring a much larger quantity since private trade finds it costlier to stock large volumes at higher prices. Higher procurement prices invariably cause FCI to procure more than what is required for food security, leading to much higher commitments for Government subsidy.
Lower volumes stocked by trade means higher market price during lean season.
There is need for some restraint in fixing Minimum Support Prices so that they are not too mis-aligned with the realities of the market. This trend is more pronounced after protection to industry was to a large extent reduced or withdrawn in 1991-92. Besides this positive development, agriculture has also benefitted from higher farm support prices during the last few years. In recent years annual increases in MSP have been substantial and at times much above the the current inflation rate. 2000 Times Internet Limited.