Will a hike in MSP help farmers?

Source: The post is based on the article “Will a hike in MSP help farmers?” published in The Hindu on 13th June 2023

Syllabus: GS 3 – Transport and marketing of agricultural produce and issues and related constraints.

Relevance: About revamping MSP.

News: Recently, the Centre announced the Minimum Support Price (MSP) for this year’s summer (kharif) season crops. The price has been hiked between 5-10% from last season. 

What is MSP?

About India’s foodgrain production

As per third advance estimates for 2022-23, total foodgrain production in the country is estimated at a record 330.5 million tonnes which is higher by 14.9 million tonnes compared to 2021-22. This is the highest increase in the last five years.

The total stocks of rice and wheat held by Food Corporation of India (FCI) and State agencies as on May 1, 2023, was 555.34 lakh tonnes.

What are the challenges faced in implementing MSP?

a) There are delays in establishing procurement centres, b) Farmers are exploited at the hands of commission agents. For instance, commission agents mostly buy the produce from farmers below the MSP, c) There is also a lack of awareness about the MSP among a large section of farmers, d) There is an absence of dependable or assured market mechanism for procurement-purchase of crops through MSP in most parts, and e) Only three to four crops (mainly wheat, paddy and cotton and at times some pulses), were being procured at MSP while the remaining crops were being procured at much below the MSP.

Non-implementation of MSP and below-MSP-procurement of a large number of crops has been one of the major hurdles in ‘crop diversification.’

What are the farmers’ opinion for revamping MSP?

a) According to the All India Kisan Sabha, the declared MSP is “unfair, belies the hopes of the farmers and inflicts huge losses in their incomes,” b) The Swaminathan Commission recommended MSP of C2+50% (C2 or comprehensive cost of production). But this remains unfulfilled, c) Farmers need to have an assurance that their crops will be purchased at the MSP to survive in the otherwise economically-unsustainable agricultural sector, and d) Farmers have been demanding a ‘legal status’ to the MSP.

What should be done?

The MSP attempts to strike a balance between the interest of growers and consumers. So, the government should a) Come up with a system to set up an ‘assured market mechanism,’ b) Focus on setting up an effective system to provide assured purchase and returns to farmers for all major crops at the MSP, and c) Procure all MSP defined crops. This would certainly bind the private players to procure those crops at least at the MSP. This will also increase crop diversification.