Freeze in Minimum Support Price on wheat and rice is among the corrective steps needed as the present food management has distorted both the domestic and export market scenario, the government's pre-Budget Economic Survey suggested on Thursday.
It called for a re-orientation of the foodgrain policy with a need for re-thinking on the rationale of raising the MSP on rice and wheat every year.
It said perhaps the only solution at hand is to freeze the current MSP until such time it becomes equal to 'C2' cost or until annual procurement settles down to earlier levels of 24-30 million tonnes.
'C2' cost includes all actual expenses in cash and kind incurred in production by actual owner plus rent paid for leased land, imputed value of family labour, interest on value of owned capital assets (excluding land) and rental value of owned land (net of land revenue).
Continuous increase in MSPs though making the terms of trade for agriculture favourable, has not only distorted domestic market prices but has also eroded India's export competitiveness.
While developed economies continue to protect their exports through export subsidies, Indian rice and wheat are not export competitive.