More than law, expansion of MSP coverage needed: Experts
The government must think of giving MSP benefits to more farmers by making fundamental changes in the current system of procurement, experts suggest
Experts differ on the issue of demand for an MSP (minimum support price) law and the need for a free market economy for agriculture even as the official data for the last five years in Uttar Pradesh show that the average open market prices of paddy and wheat have been always below MSP, except for in 2015-16 when the open market wheat price was marginally above it.
This is the situation when farm unions, which are far from ending their stir despite Prime Minister Narendra Modi’s categorical announcement on November 19 that his government would repeal of the three contentious agriculture laws, are now exerting pressure on the Centre to make a law guaranteeing that no crop in the market is purchased below the minimum support price (MSP) fixed by the government. They want such a law so that farmers could get a remunerative price for their produce.
MSP is a threshold price that acts as a safety net for farmers when they sell particular crops. These crops are procured by government agencies at a promised price to farmers and MSP, once declared, cannot be changed to the farmers’ disadvantage in that particular season. However, MSP that the Centre fixes every crop season is not binding on private traders.
Though Centre declared MSP for 23 crops, in Uttar Pradesh wheat and paddy are the two prominent crops that the state government buys from farmers at MSP to meet its public distribution system (PDS) requirement.
But official reports reveal only a very small number of farmers in Uttar Pradesh, like in the rest of the country, sell their produce to the government agencies, using the MSP route. A majority of them end up selling the same in the open market—often below MSP and sometimes at a price that does not even recover the production cost.
“It is true only a very small number of farmers are able to avail of MSP benefits in the country,” agriculture expert Ajit Kumar Singh said.
“The National Sample Survey Office (NSSO) data show that only 6% farmers in the country get to sell their crops at MSP because of reasons like lack of awareness among farmers, corruption at government procurement centres and delayed payments,” he added.
Niti Aayog also found the same in its “Evaluation Study of Efficacy of Minimum Support Price on Farmers”. The sample study published in 2016 with a reference period between 2007-08 and 2010-11 covered farmers of 36 districts (six in UP) in 14 states.
“It is observed that 28% of the farmers in UP sold their grains under MSP, 63% sold their grains in the open market and the remaining 8% kept for their self-consumption. It has also been observed during the course of study that 82% of the farmers reported to have faced various limitations in selling their food grains/crops at MSP,” the study found.
A senior official posted in the UP Council of Agriculture Research said the fact that most of the farmers were compelled to sell their crops to traders in the open market at a price that was often below the government-determined MSP lends legitimacy to farmers’ demand for a law that ensures that even private agencies did not buy their produce below MSP.
“Many people may romanticize the idea of free market economy for agriculture but we have seen how farmers feel compelled to sell their crops in the market below MSP because they cannot afford the difficulties they face in carrying their crops to government procurement centres,” he said.
Bhartiya Kisan Union (BKU) state president Rajveer Singh Jadun said the market prices of paddy and wheat, the two main MSP crops in UP, were always below the government’s threshold price. Most of the farmers, he claimed, had to sell their produce in the open market only below the MSP or at a loss. He questioned as to why prices of wheat, maida (flour) and rice, for example, were not lower in the market.
“This is why we have been demanding an MSP law so that no agency could buy any crop below MSP saving farmers from selling their produce at a loss,” he said.
Ajit Kumar Singh said there was no denying the fact that farmers did need minimum income guarantee like workers, who enjoyed a statutory minimum wage guarantee. He also agreed that the prevailing MSP system certainly helped keep the open market prices at a certain level and in the absence of MSP mechanism market prices could further dip.
“But whether making a law for MSP will be the right choice to achieve the objective remains a big question,” he said.
“I do not think it is possible to make such as law as it does not exist anywhere in the world. Moreover, the enforcement of such a law and compelling private buyers not to buy below the MSP will be a huge challenge,” he said.
Ram Saran Verma, a progressive farmer and Padma Shri awardee, had a different take on the issue.
“I am not sure if making an MSP law will be a desirable move at all. But what I genuinely feel is that government must ensure that farmers’ produce is not sold below the cultivation cost under any given situation,” he stressed.
“During the current season only, a lot of farmers in the state are compelled to sell paddy for ₹1200 per quintal in the open market against MSP of ₹1,940 per quintal. The cultivation cost of paddy is ₹1200-1300 per quintal and it pains to see farmers sell paddy at a loss,” he said.
The solution, according to Singh, lies not in making an MSP law but in expanding the present MSP coverage to more crops and making arrangements that ensure that government procurement centres buy crops from a maximum number of farmers.
The government, according to him, must think of giving MSP benefits to more farmers by making fundamental changes in the current system of procurement, he said.
“To make this possible, it can start an additional system of buying crops from farmers’ doors or fields because distance to procurement centres and the transportation cost involved, apart from many other difficulties, act as a major deterrent to farmers in selling their produce to the government agencies,” he suggested.
Verma has advice for farmers too.
“Farmers should also think of diversifying and lowering their dependence on paddy and wheat. They should adopt a rotational pattern of cropping by growing crops like pulses and oilseeds that are in scarcity in the state while the Food Corporation of India’s (FCI) godowns overflowed with rice and wheat,” he said.
The demand-supply situation, he pointed out, also determined prices.
“This is why currently the oilseeds prices in the open market are much above the government’s MSP in the state,” he said.