A farmer working in his field for Rabi crop (wheat).(File photo)
A farmer working in his field for Rabi crop (wheat).(File photo)

‘MSP not most preferred mode for farmers in Uttar Pradesh’: NITI Aayog study

According to a 2016 NITI Aayog study, twenty-eight percent of farmers in Uttar Pradesh sell at MSP, sixty-three percent trade in the open market while eight percent keep grains for self-consumption.
Hindustan Times, Lucknow | By Brajendra K Parashar
UPDATED ON SEP 26, 2020 09:29 PM IST

Only a fraction of farmers in Uttar Pradesh sells their produce to government agencies taking the Minimum Support Price (MSP) route while the rest prefer to trade in the open market or deal with private agents, sometimes even below MSP for different reasons.

MSP is the primary and immediate concern of farmers who are protesting the three agriculture reform bills passed by Parliament recently. They fear that after the enactment of new laws, the Centre may withdraw the safety net (MSP).

“We cannot trust verbal commitment on MSP. The government must make a provision in the law itself guaranteeing that MSP will continue,” said Bharatiya Kisan Union state president Rajveer Singh Jadaun.

Based on the recommendations of the Commission for Agricultural Costs and Prices, the Central government declares MSP for around two dozen crops before their sowing seasons. The idea behind MSP is to give a guaranteed price and assured market to farmers and protect them from price fluctuations and market imperfections.

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Although the MSP system is considered an important tool that protects farmers’ interests by assuring a threshold price to them, studies show that only a fraction of crops under MSP are sold to the government in UP where wheat and paddy are two major crops.

“It is observed that 28 percent of farmers in Uttar Pradesh sold their grains under MSP, 63 percent sold their grains in the open market and the remaining 8 percent kept for their self-consumption. It has also been observed during the course of study that 82 percent of the farmers reported to have faced various limitations in selling their food grains/crops at MSP,” the NITI Aayog found in its ‘Evaluation Study of Efficacy of Minimum Support Price on Farmers’.

The sample study was published in 2016 with a reference period between 2007-08 and 2010-11, covering farmers of 36 districts (six in UP) across 14 states.

Ajit Kumar Singh, economist and former director of Giri Institute of Developmental Studies, said it was true that only a fraction of farmers sold their food grains to government agencies, the role of which was very limited.

“Our survey revealed that farmers sold more than half of their produce to traders, 28.3 percent to the wholesalers, 25.8 percent to the village traders and only 14 percent to government agencies,” he said, quoting a study commissioned to him by UP’s planning department in 2010.

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These figures, according to him, indicated that agricultural marketing in the state was dominated by the traders and the role of government agencies was quite limited.

“As a result, the farmers do not get a fair value of their produce,” he said.

According to former additional director (food and civil supplies) AK Singh, sometimes farmers prefer to sell their food grain in the open market also because they get price above MSP.

“In that sense, MSP is a useful system as sometimes forces private agencies to offer a better price to farmers,” he said.

The NITI Aayog study also found that due to the unavailability of instant cash at MSP, small and marginal farmers preferred to sell to traders who made on the spot payments.

“It was also found that sometimes, small and marginal farmers resorted to distress sales due to urgent need for money or to repay the loan taken before the sowing season. Some also pointed out that MSP was too low as it did not cover the rising farming costs,” the report said.

Singh also found in his study that farmers faced a lot of problems in selling their produce in regulated markets. Nearly three-fourths of the farmers surveyed complained of undue deductions. Often, the produce was declared of lower quality and hence lower price is offered.

“More than two-thirds of the farmers surveyed complained about the long distance from the market and lack of transport facilities. Delayed payment and false weighing were the other common problems faced by the farmers. About 20 percent farmers opined that they face problems in marketing as they have small surplus to sell,” he said.

According to the NITI Aayog study, the respondents selected in UP villages were in favour of the continuation of MSP which indicated that in spite of all the lacunae in the process of implementation, people, on the whole, had benefitted from the MSP policy.

Singh also said that MSP was an important mechanism that insulated farmers against market price fluctuations as well as for the government to buy wheat and paddy for the Public Distribution System (PDS) pool.

“I, therefore, feel that farmers’ fears that the government may do away with the PDS system are a little exaggerated,” Singh stressed.

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