MSP only real risk protection for farmers, says new study

In Punjab, 90% of the agri produce is traded at markets regulated under the Agriculture Produce Marketing Committee (APMC) Act by licensed commission agents. Bihar abolished the APMC Act in 2006 and traders and private players can buy produce directly from farmers.

Updated on: Dec 20, 2020, 20:10:11 IST

Hindustan Times, New Delhi | By Chetan Chauhan

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Farmers in fully regulated agriculture markets in Punjab got 30% more price for their produce in 2018-19 than those in totally unregulated markets in Bihar and partially regulated ones in Odisha, a study of the agri markets in three states has found, terming minimum support price (MSP) as only risk-management instrument available for farmers.

A farmer working in his paddy field at Bothgarh outskirts of Morinda town in Ludhiana. (HT File Photo)

The study, by the University of Pennsylvania Institute for the Advanced Study of India (UPIASI), with local research institutes in Bihar, Odisha and Punjab, attempted to understand the dynamics of three different agriculture trading systems, and comes at the time farmers from Punjab and Haryana are protesting and demanding MSP guarantee in law, and the scrapping of the three new laws that aim to liberalise the farm economy.

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In Punjab, 90% of the agri produce is traded at markets regulated under the Agriculture Produce Marketing Committee (APMC) Act by licensed commission agents. Bihar abolished the APMC Act in 2006 and traders and private players can buy produce directly from farmers. Odisha has both the market system and farm gate procurement. “We found the price gap between open market sales and public procurement was a significant 30% and deregulation of markets as in Bihar, helped traders, more than farmers as their access to produce improves,” said Shoumitro Chatterjee, co-author of the study, in a tweet.

“Erstwhile [APMC] markets in Bihar still remain main produce selling markets but now unregulated and with dilapidated infrastructure whereas in Punjab markets are better,” he said in another tweet, suggesting that private sector investment has not come for agriculture infrastructure in Bihar.

The study said only 5% and 11% of farmers in Bihar and Odisha, respectively, sell their produce to government agencies. Around 80% farmers in Bihar and Odisha are small and marginal, according to agriculture ministry data.The study said that despite constraints such as fewer procurement centres, delays in procurement, and payments, farmers prefer selling to the government because of the assured MSP.

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In Bihar, the farmers told the surveyors that they would like to sell maize, the flagship crop, to the government because of the MSP but there are not enough procurement centres. “The study shows that the MSP is the only risk-management instrument available to the farmers as crop insurance scheme has poor acceptability,” he tweeted. The use of crop insurance was less than 7% in Bihar and Odisha, and less than one% in Punjab. The reason is cumbersome process for claims and low insurance value of produce.

The study, conducted in seven districts of Bihar, Odisha and Punjab, found that persistence of in farmer-trader relationship was weak in Bihar and Odisha, unlike Punjab. The study also found transparency in payment to farmers in Punjab. The commission agents, or arthiyas, are authorised to give cash of up to ₹10,000 only, and rest has to be transferred to the farmer. No such transparency was found in Bihar and Odisha, as unregulated small traders have replaced the licensed traders.

“The study clearly outlined that marketing challenges are more pronounced in Bihar where commission charged by middlemen in unofficial markets are much higher than in the regulated markets in Punjab and Odisha,” said former Union agriculture secretary Siraj Hussain. The study, however, also said while MSP provides price assurance, it could be hindrance for crop diversification. Farmers in Punjab and Haryana, for instance, grow largely wheat and paddy though there is higher demand of cereals and pulses.

R Ramakumar, professor at Tata Institute of Social Sciences in Mumbai, said: “The government needs to sit with farmers and assure them of compensation for the income loss due to diversification. This can be done through higher MSP for crop...,” he said.

Punjab’s cabinet minister Bharat Bhushan Ashu said farmers need assured markets to sell their produce even for diversification. “Although the government declares MSP for 23 crops, there is no assured procurement for most. If there is an assurance, farmers will be willing to diversify,” he said.

An official of the Odisha food department said they are continuously upgrading facilities so that more small and marginal farmers can sell their paddy under MSP system and admitted a shortfall of regulated markets.

Bihar agriculture minister Amrendra Pratap Singh, however, said: “They do not know the system. The MSP of paddy is ₹1,868 per quintal and it is transferred to farmers’ accounts. You can’t deposit less than the MSP.”

(With inputs from bureaus in Patna, Chandigarh and Bhubaneswar)

ABOUT THE AUTHOR
Chetan Chauhan
Chetan Chauhan is the National Affairs Editor looking into all aspects of news and features from across India. A Chevening scholar with over three decades of experience in reporting and news management, Chetan has extensively covered all important aspects of the social sector, political economy, environment and climate change nationally and internationally. He did a journalism course at the Reuters Institute of Journalism in Oxford and Digital Media training at Nanyang Technological University in Singapore. He started as a reporter with The Statesman in 1996 and joined the Hindustan Times in 2000 in the metro bureau covering environment, crime and Delhi politics. He covered hot local news, from the Jessica Lal murder case to the rebellion of Delhi Congress MLAs against then Chief Minister Sheila Dikshit, to the replacement of toxic vehicle fuel with cleaner compressed natural gas (CNG) in the national capital. Some of his stories on air pollution became part of the Supreme Court’s landmark MC Mehta versus Government of India case in the National Capital Region (NCR), forcing the government to take corrective measures. As part of the national political bureau since 2004, he covered important central sectors such as environment, education, social justice, labour, rural development, water resources, renewable energy, agriculture, broadcasting and the Planning Commission for more than a decade producing several exclusive and investigative breaking stories. His specialisation is the environment, having covered at least a dozen United Nations global conferences on climate change, biodiversity and wildlife including climate summits in Paris, Copenhagen and Bali. He also covered India’s two five-year plans ---11th and 12th and reported on drafting and execution of right based laws such as Right to Education, Right to Information and rural job guarantee law, MG-NREGA, now being introduced in new format as VG-RAM-G Act. He has in-depth knowledge of social sector issues. He was one of the first to report on tigers vanishing from Sariska and Panna wildlife reserves in 2004 and 2008, respectively, leading to the setting up of the National Tiger Conservation Authority (NTCA) and the introduction of stringent penal provisions for poaching. He has written extensively on the rising human-animal conflict in India and the degradation of India’s biodiversity hotspots because of mining and other activities. Since 2004, Chetan has covered Parliament comprehensively and participated in training on the nuanced coverage of Parliament proceedings. He has travelled extensively across India to cover national and provincial elections since 1998, especially in the Hindi heartland states, considered India’s road to power. He writes a regular column for Hindustan Times, Ecostani, on important national politics, economy, Himalayan ecology and environmental issues. His other responsibilities include providing inputs for edits and edit page articles for the publication, apart from managing news flow from across India.Read More

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