Did you know that, just like industrial workers, farmers are exploited too? So, if workers are protected by the Minimum Wages Act, shouldn’t farmers have some sort of protection as well? This is exactly why the government has introduced the concept known as MSP (Minimum Support Price). Wondering what that is? Well, keep reading!
MSP is a minimum price guarantee that acts as protection for farmers when they sell specific crops. These crops are purchased by the government at a promised price to create a central pool of food grains. This central pool is used to provide food grains under the Public Distribution System (PDS) and other welfare schemes, and is also maintained as a buffer stock in years of drought and similar situations.
Ironically, MSP protects farmers the most when they have a bumper crop. A bumper crop means that supply exceeds market demand, causing crop prices to fall and thereby lowering farmers’ income. This is when MSP comes into play, whereby the central government buys certain crops directly from farmers, at pre-determined prices (which are not based on demand-supply equilibrium). This is one of the biggest government interventions in the micro-economics of agriculture.
Currently, 23 crops can be procured under the MSP system, with wheat and rice topping the list. This, however, is also its bane, as it discourages crop diversification. MSP incentivizes farmers to grow crops that are procured by the government. Since wheat and rice are the major food grains distributed under the Public Distribution System (PDS), procurement primarily focuses on these crops. This skews crop production in favour of wheat and paddy (particularly in states like Punjab, where procurement levels are high) and does not offer sufficient incentive for farmers to produce other crops such as pulses. Further, this puts pressure on the water table, as these crops are water-intensive.
The other key problem with the MSP system is that it is not part of any legal framework, which means that what happens in real life is often very different from what gets reported. MSP is not mandatory for the purchase of food grains by private traders or companies. It acts only as a reference price at which the government and its agencies procure certain food grains from farmers. Many times, if market demand is weak, the government does not procure the crop even though an MSP exists for that crop. In such situations, farmers sell their produce to private traders at prices that are generally lower than the MSP, as traders have greater negotiating power. This has a negative bearing on farmers’ incomes. Hence, the MSP system is not properly implemented as it is intended to be.
So, shouldn’t MSP be made legal, and shouldn’t farmers have more say in how its pricing is fixed, given that they are the ones doing the hard work? No wonder farmers feel helpless.
The National Commission on Farmers, chaired by Prof. M. S. Swaminathan, submitted five reports. These reports kept farmers’ interest in mind, focused on the causes of farmer distress and the increase in farmer suicides, and recommended a holistic national policy for farmers. Among other things, the reports mentioned that:
- There is a need for improvement in the implementation of MSP.
- Arrangements should be made to extend MSP to crops other than paddy and wheat.
- MSP should be at least 50% higher than the weighted average cost of production.
However, the recommendations of these reports have never been implemented, despite farmers raising their voices for their implementation for years now. I sincerely hope the government acts soon to implement these recommendations so that farmers receive adequate returns for their hardships.
Leave a Reply