The MSP Demand
By Dr. S.S Chhina
(Senior Fellow, Institute of Social Sciences, New Delhi)
Albeit the longest-ever protest from the farming community, especially in Punjab and Haryana, which continued for about a year to repeal the three farm laws and ultimately culminated in their withdrawal, the demand for Minimum Support Prices (MSP) continues to simmer. Looking at the recent ongoing protest, it is amply clear that agriculture in India needs an overhaul right from policy to reforms in the agri-market.
An MSP is the minimum price set by the Government at which farmers can expect to sell their produce for the season. When market prices fall below the announced MSPs, procurement agencies step in to procure the crop and ‘support’ the prices. The main point of scepticism in those laws then was about the withdrawal of the government rule to procure the products of farmers.
Even though these are only wheat and paddy, which are the popular crops of Northern India, no other product is being procured, though the prices for 23 crops are announced every year. Such assurance of marketing can be given in contract farming, but the previous experience has been dismal compared to the very successful involvement of state procurement.
Looking at the scenario of marketing in different countries, it can be observed that neither the MSP is prevailing, nor the government procuring any crop. But at same time, be it either small or big, or developed or backward country, the government is very conscious about the price and production of the farm products.
Even in those countries which have vast natural sources such as Canada and Australia etc., private companies are making contracts with farmers to mitigate any volatility either in price or in output as well as for the quantity to be supplied and the price to be charged. But the government is monitoring the situation in the interest of the consumer as well as of the producer to protect both in the harvest and in off-season.
Unfortunately, the situation in India is altogether different than those countries having vast natural sources. Indian agriculture is overburdened with population, but it happens to be the profession of 60% of the population. Additionally, 95% of the holdings have less than two hectares of land, therefore making those neither economically viable nor providing full employment. Such holdings cannot take any risks for the sale of products, produced by putting in hard labour.
While analysing farming in India, it can be said that though the country was facing food shortage, the initial three ‘Five Year Plans’ couldn’t solve the problem. As a result, the country was compelled to import food with several political strings attached and tapping precious foreign exchange. The green revolution, which was ushered in the late 60s, was the concatenation of number of factors such as new varieties of seeds, more use of chemicals, installation of tube-wells, easy and cheap loans and road connectivity, but foremost of all these was the MSP along with state procurement that proved a boon.
Consequently, the perpetual rise in area and output of wheat and paddy, which are covered under the umbrella of assured marketing with MSP, was witnessed. By the early 70s the country became an exporting country from its position as a food importing nation. Even the stores fell short of preserving the produced wheat and paddy. It is to be noted that while area and output of wheat and paddy thrived, the output of other crops either remained stagnant or dived to a low level because of the lack of assured marketing.
Over the past few years, concerted efforts have been made to realign the MSP in favour of oilseeds, pulses and coarse cereals to encourage farmers to shift larger area under these crops and adopt best technologies and farm practices, to correct the demand-supply imbalance. It was very much desirable to bring other crops under the cover of state procurement at MSP, but the glitches that resonated gains of this paradigm could not be reaped. The simple announcement of MSP for 23 crops could not yield the desired results because it couldn’t be dove tailed with state procurement of those crops.
The MSP, as a tool with state procurement had delivered the desirable results, the production of wheat and paddy rose exponentially where a number of crops in which the country was self sufficient have to be imported and the bill for such crops thrived profusely as edible oils were being imported worth one lakh crore rupees every year.
It would be ludicrous to assume that the Central Government can purchase every single product throughout the country. India has 15 different agro-climatic zones, and each zone is producing different crops. Even in a state there are different zones suitable for different crops. Twenty-three crops for which the MSP is announced or the popular crops of different states and even of different districts in the same state. The popular crops of each zone must have assured marketing.
The State Government must collaborate with Central Government for the popular crops of the state. This is never a losing proposition. The farmers must be given incentives to produce more and more yield and the consumers should be protected with stable prices in the off-season.
At the time of Independence, the population of the country was 340 million but that thrived to 1380 million in 2020 or rose by 4.1 times, but in comparison to that wheat rose to 1090 million tonnes from 70 million tonnes or by 15.5 times. Similarly, the production of paddy rose to 1220 million tonnes from 260 million tonnes or by 4.8 times. However, it was possible because of the miracle of MSP, whereas other products fell short in production as well as area because of the lack of MSP.
While following the model of developed countries where the Government is monitoring farm production, it is not just staple products but even other products like potatoes, tomatoes, milk, eggs and fruits which are being procured adequately both for the interest of producers as well as consumers. Such a model must be adopted in all the states and also the Kerala model of interference in vegetables prices.
The farmers producing different crops must be registered for specific areas or quantity, to realise the diversification. The states and even the districts should be divided in zones based on the yield of the respective crops. Only the suitable crops of the area should be procured at MSP. It has been observed that even the crops not suitable to an area are being grown only because of MSP. For example, in Punjab paddy is grown in sandy areas of Bhatinda and Fazilka only because of state procurement.
Once such a policy is adopted for different crops, the results will definitely be very encouraging. However, it will be more practical and beneficial if the State Governments share the responsibility with the Central Government for the interests of the producers as well as consumers. — INFA