Guaranteed MSP is real farm reform: The case of edible oil
To end the ‘forever war’ with farmers, the central government must announce a law to guarantee minimum support price (MSP) for the purchase of all 23 crops whose calculations are made by the Commission of Agricultural Costs and Prices (CACP).
It is known that assured procurement of only cereal crops has resulted in an overflowing buffer stock, which is more than three times of the mandated norm. However, the nation owes a debt to the humble farmer whose hard work ensured that there were no starvation deaths in the worst pandemic since the Spanish flu in 1918 and the famines in Bengal and Travancore in 1943. Records show that 92 million tonnes of grain were distributed for Covid relief, for migrant labour and the public distribution system (PDS) last year as against an average of 62 million tonnes for the past five years, starting 2014.
In 2020-21, rice and wheat worth ₹70,000 crore ($9.36 billion) were exported. Aggressive cereal exports can raise a reserve fund (RF) for procuring all 23 crops. It is estimated that around ₹1.2 lakh crore can be raised by exports this year. How can this RF of 1.2 stabilise the farm economy?
Shifting from wheat to oilseeds
For a start, let us examine the case of oilseeds. India is the world’s largest importer of vegetable oils, buying two-thirds of its requirements overseas. In 2021, we imported crude and refined palm oil worth $5.8 billion. Edible oil is the third largest import after petroleum crude and gold.
With an assured MSP, our farmers will produce enough oilseeds to make the nation self-sufficient. Isn’t this a golden opportunity to resolve the farm crisis, increase rural incomes, kickstart demand for industrial goods and save precious foreign exchange in the bargain?
Using government agencies such as Nafed, FCI, STC, Punsup and Markfed, the MSP announced should be guaranteed at the time of purchase from the farmers. Physical procurement need not be necessarily made. Just like the Cotton Corporation of India gives price support for keeping cotton rates afloat, these government agencies, funded by the GoI, may buy, stock and trade in oilseeds only if the open market rates fall below the MSP. The CCI also does not purchase all cotton sold in the mandis.
This month the Cabinet Committee on Economic Affairs approved the hike in MSP of rapeseed and mustard by 8.6% and of safflower by 2.14%. If the government were to announce assured procurement, many farmers would shift from wheat to oilseeds in the coming rabi season itself as the MSP of wheat has been increased by only 2.03%.
Palm oil plantation plan flawed
For some inexplicable reasons, the GOI is planning to expand palm oil production in ecologically sensitive regions such as the Andaman Islands and in the North East. It is known that edible oil plantation tends to replace natural tropical forests, depleting biodiversity. Perhaps that is why Sri Lanka has banned fresh palm oil plantations, mandating older plantations to be phased out.
This misplaced thrust on unsustainable agriculture is likely to meet rejection by the Supreme Court, which in 2002 ordered the phasing out of all exotic plantations to conserve the island ecology. The Supreme Court will keep in mind the warning issued by the Inter-governmental Panel on Climate Change (IPCC) that increasing deforestation and destruction of biodiversity is a major cause of climate aberrations.
Additionally, the plan is flawed as the goal is to reach a production target of 2.8 million tonnes by 2030. The target can be achieved much earlier by encouraging oilseed cultivation in the irrigated lands of UP, Rajasthan, Haryana and Punjab for a start. The worst example of misspending scarce resources is that this flawed scheme provides free fertiliser, guaranteed price to the palm oil plantation owner and viability price funding to the oil refiner. This has prompted observers to ask why the farmers of other oilseed crops are being given stepmotherly treatment.
Self-reliant in oil production
India is equipped to become self-reliant in edible oil production. It has the suitable natural conditions to produce several nutritious oilseeds, including groundnut, mustard and cottonseed. Indian farmers have a special skill in growing oilseed crops, which go well with other crops using traditional mixed farming systems and crop rotation. The reservoir of skill at the village level has generated small-scale oil processing and extraction plants, which produce high quality oil and nutritious oil cakes (as a byproduct), which are then used in the local dairies.
All that needs to be done is to make farmers aware through agricultural universities and the state agriculture departments of newer varieties and to supply them certified good quality seeds. Earlier, the National Oilseeds Technology Mission, launched in 1985 succeeded in making India more or less self-reliant in edible oil production and the nation was producing 97% of its requirement at home by 1994. This is certainly doable now, too. firstname.lastname@example.org
The writer is a retired IAS officer and former chairman of the Punjab State Electricity Regulatory Commission. Views expressed are personal