Paradox: Though govt buys groundnut below MSP, farmers won't sell to mills

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Excess production of groundnut in Gujarat has led to a steep fall in prices, which is affecting farmers. Moreover, with the bulk of the produce being procured by the government under minimum support price (MSP), oil mills are facing a shortage of raw material.

The Gujarat government has so far procured close to 680,000 tonnes of groundnut at Rs 4,500 per quintal. However, there has been an apparent cap on procurement from each farmer. Moreover, the government is expected to continue procurement, albeit in a staggered manner.

Yet, farmers are reluctant to sell the groundnut to oil mills, leading to hiccups in raw material sourcing for the mills. According to industry sources, farmers are holding on to their produce in the hope it will be procured at a higher rate by the government.

"A bumper crop in Gujarat has led to fall in groundnut prices to below MSP at Rs 4,000 per quintal. However, the government is procuring limited quantity at Rs 4,500/ kg MSP. Hence, farmers are reluctant to sell at market prices lower than MSP to oil mills," said B V Mehta, executive director, Solvent Extractors Association of India (SEA).

The Bharatiya Janata Party (BJP) ruled government had in October announced procurement of groundnut at MSP with market prices coming under pressure due to a bumper crop.

Solvent Extractors' Association of India (SEA) has estimated a record kharif groundnut production in Gujarat this year, with the same expected to be around 3.14 million tonnes of groundnut this year as against 2.94 million tonnes last year kharif season.

According to SEA survey, Gujarat is expected to harvest 3.145 million tonnes during kharif season, a record production, despite acreage under kharif groundnut in Gujarat marginally decreasing to 1.6 million hectare, as reported by the Gujarat Government.

In the wake of market prices of groundnut pressure, Nitin Patel, deputy chief minister of Gujarat had reiterated last week of the government continuing to procure groundnut for Rs 4,500 per quintal, despite market prices being at Rs 3,500 per quintal.

"However, there is some raw material crunch with the oil mills due to farmers' reluctance to sell groundnut. Farmers are waiting for the government to procure as much groundnut as possible. However, the situation should dissipate in the coming days," said Mehta.

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