Number Theory: Will Congress’ promise of higher MSPs in MP bolster its cause?

Can this be a game changer in the Madhya Pradesh elections? Here are four charts which try to answer this question.

Among the key promises in the Congress manifesto for the Madhya Pradesh assembly election is a minimum support price (MSP) of ₹2,600 per quintal for wheat and ₹2,500 per quintal for rice.

HT Image

Will Congress’ promise of higher MSPs in MP bolster its cause?

• 
  Madhya Pradesh has the second largest share in wheat procurement in India

  The reason MSP promises do not have a widespread traction in large parts of the country is that procurement is heavily skewed in favour of some states. Where does Madhya Pradesh figure in procurement of wheat and rice? An analysis of data from the Food Corporation of India (FCI) shows that Madhya Pradesh is a significant state when it comes to wheat procurement in India. It was ranked second in terms of total quantity of wheat procured in the rabi (winter crop) marketing season from 2020-21 to 2020-23, just behind Punjab and much ahead of Haryana. It was also ranked second in the last ten years, but almost at the same level as Haryana. In case of rice, however, Madhya Pradesh is relatively insignificant in terms of all-India procurement.
• 
  But only a small share of farmers benefit from procurement operations in Madhya Pradesh

  While the state-wise imbalance in procurement operations is a well-known fact, this is not the only factor in determining the salience of an MSP promise in elections. For such a promise to play as a game changer, there has to be a large part of the electorate which can hope to benefit from implementation of such a promise. It is there that the 2018-19 Situation Assessment Survey (SAS) conducted by the NSSO can tell us more about the role of MSP promise in elections. SAS data shows that only about 10% of agricultural households – the 2018-19 SAS defined agricultural households as those that had one member self-employed in agriculture and produced agricultural products (including those from animal farming) worth at least ₹4,000 in the year before the survey – sold wheat to an MSP procurement agency in Madhya Pradesh during January-June 2019. This number is roughly 7% of the state’s rural population and 5% of the overall population in the state. This means that while Madhya Pradesh is far behind traditional procurement states such as Punjab and Haryana in the share of agricultural households selling wheat to an MSP procurement agency, the share of population benefiting from MSP operations is similar in all three states. This is because the proportion of rural population in Punjab and Haryana is significantly smaller than in Madhya Pradesh.
• 
  Are farmers not selling wheat at MSP a distressed lot in Madhya Pradesh?

  What makes MSP important in Indian agriculture is the fact that it acts as a price cushion and therefore indirectly helps farmers who do not sell their crop directly to a procurement agency. This effect is more pronounced at the level of states than the national level. Is there a large section of wheat farmers who do not sell their crops at MSP but are dissatisfied with the prices they received for their crops? SAS data can help us answer this question for 2018-19. It shows that the majority of farmers who sold wheat in the market (whether or not at MSP) were satisfied with the price they received. To be sure, the share of dissatisfied wheat farmers in Madhya Pradesh is higher than what it is in states such as Punjab, Haryana and Uttar Pradesh.
• 
  Wheat prices are significantly higher than the MSP at the moment

  It needs to be remembered that Madhya Pradesh is going to polls at a time when wheat prices have seen a significant increase in the recent past. An HT analysis of wheat prices this October in Madhya Pradesh suggests between October 1 to October 18, at least one market in 22 of 50 districts of the state for which Agmarknet publishes crop prices data reported wheat prices more than ₹2,600 per quintal. The median price during this period for a date-market-variety combination was ₹2,400 per quintal, which is significantly higher than the MSP of ₹2275 per quintal announced by the union cabinet on October 18. The statistics given above suggest that a higher MSP promise for wheat might not create a lot of enthusiasm among farmers in Madhya Pradesh. The only factor which could change this analysis is the fact that the promise gives the Congress a platform to attack the MSP announcement by the BJP government in the centre.