Minimum Support Price (MSP) for agri produce is the new war cry.

Indian Government burns its fingers – withdraws Farm Laws.

We, like so many of us concerned with farmers, attempt in this blog to look into their demand for compulsory Minimum Support Price of agri produce. The demand which has forced them to demonstrate all-round the Indian capital for one year or so. Also in other Capitals worldwide too. Braving all sorts of weather and other logistical problems. People have died.

The crippling blockage by Indian farmers has had a disastrous effect on Indian economy already battling with COVID restrictions.

In the Constitution, ‘Agriculture’ has been placed as Entry 14 in the State List along with several ancillary matters, while some agriculture-related items have been included in the Union List and the Concurrent List. Many States have complained that notwithstanding Entry 14 of State List, the Union Government has made undue in roads in the sphere of agriculture, which according to them should remain an area of exclusive State jurisdiction.

Left with few options, Government of India has declared that the three farm laws which riled the farmers would be formally withdrawn in the winter session of the parliament later this month.

The farmers have stated their intention to continue their agitation till laws to protect compulsory Minimum Support Price MSP are also formalized.  The new goal post for government is formulation of compulsory MSP laws.

MSP (Minimum support Price)

MSP exists even today as exemplified by 23 MSPs announced by the Indian government for

• 7 cereals (paddy, wheat, maize, sorghum, pearl millet, barley and ragi),
• 5 pulses (gram, tur, moong, urad, lentil),
• 7 oilseeds (groundnut, rapeseed-mustard, soyabean, sesamum, sunflower, safflower, nigerseed)
• 4 commercial crops (copra, sugarcane, cotton and raw jute).

How MSP works

In practice the produce comes into the market almost all at one time.  This causes a glut in the mandis and makes for a buyer’s market.  The government procurement agencies have only so much capacity to procure.  This makes farmers vulnerable to distress selling and MSP is no longer operative at least for this distress selling.

Farmers demand, rightly, that nobody would buy or procure the produce below the MSP.

Here are the contradictions.  India has a free economy in all goods and trade. Competition is encouraged to keep prices in control. People are afforded all types of varieties in any one good and choose which suits them best. A maximum retail price (MRP) is put on all goods to ensure no person is cheated by price fixing of a product.

Problems in fixing Minimum Support Price

Fixing law that all agri produce of farmers had to procured/bought at or above minimum support price (MSP) is fraught with several severe problems.

• Excess production in wheat and rice results every year in large scale destruction and wastage in godowns, railways yards and other places of storage. Ensuring MSP purchase of such produce will result in a race to produce more and more, resulting in wastage and destruction at greater scales.
• Similar demands would certainly be made for more and more number of agri items. May be vegetable and fruit growers would join the dharna and rasta rokos.  Apple growers already are demanding a MSP.
• Already Telengana paddy surplus has made its Chief Minister sit on a dharna demanding procurement of entire state produce paddy on MSP!!!
• There is no Income tax incidence on agricultural income in India. A number of subsidies are available to farmers.
• The Indian government makes a regular payment to farmers for seed and fertilizer procurement in three installment per year.
• MSP payment are to be made out of tax paying hard working people of India. It is better to have a free economy so that all people share equally in pay outs for agri produce.

Compulsory Minimum Support Price

Government of India has announced that a committee of agriculturists and agri scientists would be constituted to come out with recommendation on MSP laws.  Below are some ideas which could be worth pursuing by this committee.

1. Decide on what would be the items of agri produce in addition to those already covered.
2. Decide on quantum of each produce which is required for our consumption.
3. Decide whether a produce could be competitively exported and if so how much quantity is to be targeted for same.
4. Each state to decide what agri produce is suitable for the soil and weather prevalent in that state. 
5. Distribute the agri product in best way possible amongst the states. Eliminate as far as possible variation in the agri produce yields due to soil and weather variations.
6. Transport of agri produce between states should both cost effective and time effective.
7. While deciding on the MSP of the produce, subsidies on cost of fertilizers, electricity and diesel to farmers may either be thought as withdrawn OR added in the structure of MSP. Agri prices should adhere to normal market behaviors. If input costs increase, MSP increases and if input costs decrease, MSP decreases.
8. MSP for the agri produce having international trade potential needs encouragement.
9. Central to MSP debate is that State must encourage diversification in agri produce portfolio in their areas. AND farmers need to respond favorably in this direction.
10. Inter-crop price parity can be utilized to encourage or discourage a particular Cropping pattern.
11. Farmers would need to be ready to give land for establishing industrial clusters for transformation of their excess produce to commercial use e.g. bread, biscuits, floor, frozen, ready to eat as well as for modern very large godowns.
12. Agriculture is a state subject and be primarily resolved at state level. State governments should have their own Agricultural Prices Commissions.

Fixing of MSP through such a process would be a task which would take collation of many data from various sources and thereafter its interpretation. The demand for immediate declaration of MSP law, as a sine qua non for lifting of the crippling and damaging blockage of several main high ways, should not be insisted on by the farmers associations.  They need to repose trust in the Indian and their state governments and give them time.  Farmers of all States also need to deliberate freely in the formulation of such MSPs.

MSP would be successful only if Farmers produce is in sync with demand for its consumption.

Point to Ponder: will our farm produce become non-competitive for world export with general MSP domain.

Readers what are your views ?

About nkp

Hi ; I have had opportunity to travel widely and have keen watched whatever farming practices the local farmers were engaged in. Back home been growing gerberas mostly in polyhouses, but outside in kitchen garden as well. i love these hardy perennials. good for business too if done in a routine orderly scientific manner. Also engaged in farming of wheat and organic vegetables on a small scale for me and family. My service profile has been that of an electronic and telecom engineer and now am engaged in web site creation and blogging.