Current Affairs 2022: Extending Minimum Support Price for All Crops

By Sachin Singh

Recently a debate was going around to extend the Minimum Support Price for all crops. Read here the fiscal impact of such provisions on public expenditure.

Minimum Support Price or MSP is the minimum price fixed by the government body for agricultural products, at which the farmers can sell the products if the market prices are less than that of the costs incurred by them. It is an intervention that supports the farmers from distress sales and encourages production which was first introduced in 1966-67 when the country adopted the green revolution. These prices are fixed based on cost, demand, supply position, price changes, market price trend, different costs and international market prices.

Crops Covered Under MSP

There is a total of 23 major agricultural commodities for which the MSP is decided by the Department of Agriculture & Co-operation (on the recommendations of the Commission for Agricultural Costs and Prices – CACP) before their sowing seasons. And the crops covered are Paddy, Jowar, Bajra, Maize, Ragi, Arhar, Moong, Urad, Groundnut (in shell), Soyabean, Sunflower, Sesamum, Nigerseed, Cotton, Wheat, Barley, Gram, Masur, Mustardseed, Safflower, Jute and Copra. The prices are announced way before Kharif and Rabi’s sowing seasons.

The market prices are generally higher than the MSP provided by the government. And in case no one buys it, the government will buy the stock at this minimum guaranteed price. Also, it should be noted that not all the farmers of the country are benefited from the MSP. It would not be wrong to mention that this scheme is not implemented uniformly across the country and in this process a few states and some crops got higher benefits out of its implementation. The cost of the crop decided by the central government remains the same all over the country which is a major reason why some of the farmers are not able to get the benefit of the scheme as the cost of cultivation varies from state to state.

In the recent past, we saw how farmers protested against the farm laws passed by the parliament as they demanded a legal guarantee of the same. We can’t conclude that by extending the MSP problems are solved. Farmers face many other issues such as they are not clear on which crop to grow when to sow, and which pest is affecting their crop. Also, prices fluctuate depending on seasonal demand and supply, which is one of the most important factors to be discussed. The most important risk in the farming sector is associated with climate changes and the factors that are not in hands of the farmer.

We have seen that MSP is the core of the agricultural revolution that saw India changing from a food-deficient nation to a food-surplus nation. Over the period, the MSP has helped the farmers in the country deal with the effects of financial fluctuations.

There are pros and cons of extending the MSP for all the commodities. An increase in MSP or extending it to other crops without investing in infrastructure doesn’t seem to have a long term impact. Also, MSP is a nationwide single price policy, but the actual cost of production varies from state to state; transportation, storage and loading-unloading charges will anyhow have to be borne by the farmers, even if these factors are considered at the time of fixing the MSP. Currently, only the central government decides the MSP for crops based on average expenditure but it is also a matter of states and they should also contribute their views towards the same. The central government is not able to buy the crops from the farmers at the present MSP, while everybody knows that only 6 per cent of the farmers can sell the crops at the MSP.

Also, amid lockdown, the central government has increased the Minimum Support Price of 14 Kharif crops in June to provide relief to the farmers. Even earlier, whenever the governments had hiked the MSP, they claimed that it will greatly benefit the farmers of the country, but the ground scenario is not the same. And in some cases, it is observed that farmers are incurring a loss instead of any profit. According to the Shanta Kumar Committee, which was formed to suggest restructuring of Food Corporation of India (FCI) in 2015, stated that only 6 per cent of the MSP could be received by the farmers actually, which directly means that 94 per cent of the farmers of the country are deprived of this scheme of the government. And in many cases, it is noticed that farmers are not aware of the right price before the sowing season. Therefore, it becomes the duty of the government to use proper channels of communication and awareness campaigns so that the poor can benefit from the government schemes.

Although the MSP is in existence for more than four decades now, there are no guidelines to regulate pricing support schemes. We need to come up with better interventions as and when required after proper study of the factors and challenges faced by farmers which are affecting them on the ground. The time has come when we need to have a strict law on minimum support price so that no one can procure farmer’s crop below a fixed rate and anyone doing so should be punished. Steps such as direct benefit transfer (DBT) can be introduced to help and support the farmers efficiently and more transparently.

Therefore, we can say that MSP while being so significant in today’s time is not the only go-to solution for all the woes for farmers. Some important and effective steps need to be taken so that this scheme can be implemented uniformly throughout the nation and the main motive of helping and supporting the farmers can be achieved.

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