MSP solution missing even as kharif sowing commences

by Mahesh Vyas

India is projected to get adequate rains during the four months of the southwest monsoon - June, July, August and September according to projections made by the India Meteorological Department and also by Skymet Weather. The IMD has projected rains of 97 per cent of the LPA during the monsoon months.

Both, Skymet and IMD expect below-normal rains in August. IMD expects rains to be below-normal in the southern peninsula and in the north-east.

The monsoon set early in Kerala, on May 28. By June 1, it entered north-east and was expected to lash heavily into the west coast by June 9.

During the first week of the 2018 monsoon season, the southern peninsula received 23 per cent more precipitation than the norm for the period. However, coastal Karnataka and Kerala, its two large sub-divisions received significantly low precipitation - of -50 per cent and -27 per cent. Overall, the rains were 10 per cent below normal during the week.

The kharif sowing season has just begun. As of June 8, only eight per cent of the normal area under the kharif crops (which is about 8.5 million hectares) was sown. This was a shade lower than the 8.1 per cent area sown by the same time in 2017. But, it was much better than the situation in 2015 and 2016 when by early June only 2-4 per cent of the normal area was sown.

Most of the sowing so early in the season is of sugarcane, jute and cotton. Nearly all the sugarcane sowing is complete and about 80 per cent of jute is complete. Sugarcane sowing in 2018 is one per cent higher than it was in 2017. The preceding two years had seen 8-9 per cent growth in acreage. Acreage had to plateau. Besides, mounting cane arrears in Uttar Pradesh could have dampened any enthusiasm to increase acreage further.

In the beginning of June, about 10.4 per cent of the normal area under cotton was sown. Compared to a year ago, this marked a substantial 11.2 per cent fall. Although acreage had increased well during the previous year, by 17 per cent, output was hit by the pink bollworm and so, its production growth was only about 7 per cent. Prices were flat.

Sowing of foodgrain and oilseeds is yet to begin in earnest. By June 8, two per cent of the normal area under foodgrain was sown and, a much lesser proportion of the normal area under oilseeds was sown. Sowings of foodgrain has been marginally higher than last year.

The government has set a target of producing 140.2 million tonnes of foodgrain in kharif 2018. The third advance estimate for foodgrain production in kharif 2017 is 138.7 million tonnes. The target therefore implies a modest growth of 1.1 per cent. On an average, foodgrain production grows 2 per cent in a year. But, this average contains high year-to-year volatility.

The past two years saw growth of 10.6 and 0.3 per cent. It is not common for foodgrain production to grow for three consecutive years. In the past 40 years, kharif foodgrain production has grown in three consecutive years only once.

The kharif oilseed target is 25.5 million tonnes against an estimated production of 20.7 million tonnes in 2017-18. The target set for kharif 2017-18 was 25.4 million tonnes. But, production missed this target by a huge margin and also fell from 21.5 million tonnes produced in kharif 2016-17.

The apparently aggressive targets require strategy besides favorable weather conditions.

Sowing strategies would need to factor in IMD’s projection that the precipitation would not be very good in August and could be weak in July as well. Weakness of farm prices and continued farmer agitations need government attention. Farm prices in particular play a role in determining sowing decisions. In this regard, the government is remiss in failing to announce its MSP for the kharif season in advance of the commencement of sowing.

Wholesale price index for foodgrain prices in April was 4.2 per cent lower than its level a year ago. The index for cereals was 0.2 per cent higher and that for pulses was 22.5 per cent lower. While the overall oilseeds index in April 2018 was 6.5 per cent higher than a year ago, groundnut seed was 21.6 per cent down and soyabean was 24.2 per cent up although soyabean was still lower than its level in April 2016.

Central government’s budget announcement, in February, of ensuring minimum support prices that are at least 1.5 times the cost of cultivation has not yet translated into a precise scheme. NITI Aayog proposed three models to implement the budget announcement in a meeting with several central ministries and state governments in March. Reports till the end of May suggest that the proposals are still being worked upon.

But, it would be better if farmers know the proposed solution and digest its implications before they distribute the sowing of their land over the alternate crop choices they may have.

Unemployment Rate
Per cent
6.1 +0.1
Consumer Sentiments Index
Base September-December 2015
100.6 0.0
Consumer Expectations Index
Base September-December 2015
99.7 0.0
Current Economic Conditions Index
Base September-December 2015
98.2 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Sep 17 Dec 17 Mar 18 Jun 18
New projects 1.25 1.51 3.42 2.32
Completed projects 1.25 1.16 1.56 0.91
Stalled projects 0.69 0.88 3.44 0.30
Revived projects 0.34 0.24 0.26 0.22
Implementation stalled projects 0.78 0.71 1.92 0.04
Updated on: 14 Aug 2018 4:20PM
Quarterly Financials of Listed Companies
(% change) Sep 17 Dec 17 Mar 18 Jun 18
All listed Companies
 Income 7.9 12.0 9.7 16.9
 Expenses 9.0 13.0 16.2 20.2
 Net profit -18.0 -14.3 -80.3 5.5
 PAT margin (%) 5.5 4.8 1.2 6.1
 Count of Cos. 4,508 4,503 4,325 2,657
Non-financial Companies
 Income 8.2 13.3 11.1 19.2
 Expenses 8.2 12.4 11.7 21.6
 Net profit -6.0 13.2 1.6 31.4
 PAT margin (%) 6.2 6.4 6.6 7.7
 Net fixed assets 9.2 11.8
 Current assets 2.9 7.2
 Current liabilities 11.0 10.4
 Borrowings 3.4 1.9
 Reserves & surplus 7.9 7.2
 Count of Cos. 3,464 3,471 3,347 2,098
Numbers are net of P&E
Updated on: 14 Aug 2018 4:21PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 6.0 9.9
 Expenses 5.7 1.9 6.0 13.3
 Net profit 0.1 -9.7 25.8 -37.5
 PAT margin (%) 3.0 2.8 3.5 4.2
 Assets 9.5 10.2 7.5 13.2
 Net worth 8.5 11.3 7.7 12.8
 RONW (%) 5.8 4.9 5.8 5.7
 Count of Cos. 26,178 24,474 22,051 749
Non-financial Companies
 Income 4.9 1.0 5.8 8.5
 Expenses 5.1 0.4 6.1 8.0
 Net profit -9.4 19.9 20.7 6.6
 PAT margin (%) 2.0 2.4 3.0 9.3
 Net fixed assets 13.3 17.9 6.7 27.6
 Net worth 7.0 12.0 6.6 9.7
 RONW (%) 4.6 5.1 5.9 13.2
 Debt / Equity (times) 1.1 1.1 1.0 0.4
 Interest cover (times) 1.9 1.9 2.1 6.2
 Net working capital cycle (days) 66 65 62 8
 Count of Cos. 21,351 20,488 18,371 585
Numbers are net of P&E
Updated on: 12 Aug 2018 11:30AM