Resolving farmers’ concerns, bridging State-market divide

While MSP and timely procurement have long been pillars of India’s agricultural policy, the agrarian crisis and farmer suicides demand a proactive response.

As farmer leader Jagjit Singh Dallewala’s indefinite fast at the Khanauri border in Punjab continues, the Union government has agreed to hold talks with protesting farmers on February 14. This shift in approach has temporarily eased tensions, raising hopes for resolving the key demand to legalise minimum support prices (MSP).

Vegetable vendors wait for customers at a local market in New Delhi on February 1, 2025. India's finance minister unveiled broad income tax cuts on February 1, as Prime Minister Narendra Modi's government looks to bolster consumption and perk up a slowing economy. Consumers have been burdened by high food inflation and weak wage growth, two factors impacting urban consumption. (Photo by Arun SANKAR / AFP) (AFP)

The Centre must now adopt a conciliatory approach, particularly as it pushes the National Policy Framework on Agricultural Marketing, which farmer groups see as an effort to corporatise agriculture. The key challenge is for the government to lead while balancing farmers’ welfare and food security, and carefully bridging the government-market divide.

An amendment to each state’s APMC Act can ensure that farmers’ produce is never purchased below MSP, with penalties for violations. This should be an integral part of the central policy framework. If private traders fail to procure at MSP — especially after harvest, due to temporary supply-demand mismatches — the government should be prepared to procure up to 25% of total production, as permissible under the Price Support Scheme (PSS). This would demonstrate strong government intervention, stimulate market dynamics, and help stabilise prices above the MSP, all without placing a heavy burden on the government’s exchequer.

The focus should first be on the 21 food crops currently covered under the MSP regime, along with three key vegetables —potato, tomato, and onion. An initial Price Stabilisation Revolving Fund should be set up in each state, supported by the Centre, to ensure legally binding MSP through timely intervention. This fund, when established, would not exceed ₹5 lakh crore to support MSP, as recommended by the Swaminathan Commission, for the whole country. The actual burden on the government exchequer, if implemented carefully, would be limited to no more than ₹25,000 crore to cover the deficit between procured and market prices.

This assessment draws from past experience, which highlights the likelihood and duration of farm commodity prices falling below the MSP. With a national budget of approximately ₹50 lakh crore, this represents a manageable financial commitment. Legal guarantees for MSP can be further strengthened by ensuring essential backwards and forward linkages, such as crop planning, building post-harvest infrastructure for efficient storage, transportation, and processing, and offering liberal pledge loans to manage post-harvest gluts in farm commodities.

Procurement should be strategically focused on supporting over 810 million people under the Public Distribution System (PDS), feeding around 120 million children daily through the midday meal scheme, and other programmes under the Food Security Act, 2013. These initiatives are designed to address the persistent issues of hunger and malnutrition — critical challenges that still require urgent attention. In short, the debate has shifted from why legal MSP is necessary to how it can be effectively implemented.

Several realistic initiatives have already been attempted to operationalise legal MSP within a statutory framework. The Maharashtra government and the Karnataka Agricultural Prices Commission have taken steps in this direction. In 2018, a private member’s bill was introduced in Parliament. A more recent initiative is the draft Andhra Pradesh Farmers’ Produce Support Price Act 2023, which allows marketing agents from private, corporate, and cooperative sectors to engage in barrier-free transactions of farm commodities — including livestock — both within and outside APMCs via a digital platform. This draft bill ensures that no transaction occurs below MSP or an equivalent price in the state, making it a noteworthy model. The key challenge now is reconciling the divide between the market and the government.

In agriculture, where producers have little control over the prices they receive, government intervention remains essential. This is more or less the norm in farm commodity markets worldwide. While MSP and timely procurement have long been pillars of India’s agricultural policy — ensuring income predictability for farmers — the ongoing agrarian crisis and rising farmer suicides demand a proactive government response. A strategy that balances the growth and efficiency aspects of the market with the government’s social justice objectives should help in furthering the dialogue.

The Supreme Court’s high-power committee, formed to negotiate with agitating farmers, can play a key role in this process. It would not only shift farmers from protest to productivity, getting them back in the field but also strengthen food security and contribute to the nation’s long-term prosperity.

TN Prakash Kammardi is an agri-economist and a former chairman of the Karnataka Agricultural Prices Commission.The views expressed are personal