After farm laws repeal, farmer unions want legal guarantee for MSP. Should the govt give in?

News: Despite the announcement by the PM to repeal the three farm laws, farmers are demanding that, MSP should be made a legal entitlement.

This article provides both the side of the arguments (support and against) w.r.t legalising MSP demand. Some points are already covered in the following article:

What are the arguments in support of legalising MSP?

Farmer distress: Survey after survey has shown that income from farming is inadequate to sustain basic financial needs of farming households. Hence, MSP represent a lifeline for farmers, and they want that lifeline to be given legal sanctity.

India’s Food security: India’s food independence and security against hunger are non-negotiable and this independence and security depends on farmers continuing to farm and produce food to feed nearly 1.38 billion citizens.

Lack of avenues to absorb the out-of-work farmers elsewhere in the economy: The proponents of free-market price discovery argue that this very mechanism will push farmers out of farming where excess labour is currently unproductive. However, Indian economy currently doesn’t have the capacity to absorb the 900 million farmers of India.

Fundamental right: The demand for legal guarantee of MSP also stems from the constitutional fundamental right to life and livelihood. It is the constitutional duty of the government to ensure and enforce this fundamental right in favour of the farmers of India.

What are the arguments against legalising MSP?

Other effective alternatives exist: If the objective of MSP is to help the poor, we can now effectively use the most direct way. For less than the amount spent on MSP, we can lift millions out of poverty by transferring funds into their bank accounts.

If our objective is to reduce farm price volatility, then direct funds transfer to the poor can partially address that objective along with a well-regulated crop insurance system.

Impact on Nutrition and export earnings: MSP is given only for a few crops, which means there is excessive production of these at the expense of other crops that may be more nutritious and could earn us export revenues.

Impact on water security: A distorted focus on few crops also depletes the water table.

Give rise to vicious demands: There is a demand to expand MSP to more crops, which is financially unviable for the government.

Effects of MSP on equity: Poor farmers get virtually nothing from MSP because they have little or no surplus, and many subsist as agricultural labourers.

In sum, MSP may have a few positives, but it has many negatives and should be deployed only with great circumspection.

Source: This post is based on the article “After farm laws repeal, farmer unions want legal guarantee for MSP. Should the govt give in?” published in ToI on 26th November 2021.