India’s pulses problem: We need real reform

Synopsis: Some inherent flaws in MSP system and what the government needs to do to address them.

Introduction

India is the largest producer and consumer of pulses in the world. However, we consume more than what we produce. Therefore, pulses are imported, and the general public suffers due to the unusually high prices.

The main reason for this imbalance is the half-hearted and ad-hoc price policy of the government.

How is the ‘MSP’ price  determined?

Commission on Agricultural Costs and Prices (CACP), established under the Union Ministry of Agriculture, fixes the minimum support price (MSP) of all agricultural products, including pulses.

The MSP is set on the basis of cost of production; position of supply, demand; prices in markets, position of prices relative to other commodities, proper use of natural resources like land and water, economy of the country, and 50% profit on cost of production.

What are the issues in ‘MSP’ system?

For all MSP-notified crops:

The so-called 50% profit to the farmer is not per the government’s intended formula, and so it is relatively low. However MSP does not have any legal backing till now and farmers can’t demand it as a legal right.

The CACP is by status a department whose recommendations are only advisory.

Representation of farmers is minimal.

For Pulses specifically:

Consumers have to buy pulses at 150% to 200% of MSP. This increases inflation and puts an unbearable burden on the weaker section.

Pulses are imported at prices lower than the domestic ones.

Ineffective measures by government like reducing the storage limit of pulses under the Essential Commodities Act.

What are the reforms needed?

The MSP formula should be revised and the purchase of each crop in the entire country should be ensured at that declared price.

The commission should be given constitutional status, so that its recommendations are binding.

A maximum retail price for consumers should be fixed by adding a reasonable profit of 50-60% over MSP to the farmer.

All restrictions on transport, storage, trade, processing and export of all agricultural products should be abolished.

In case of low domestic production, imports and taxes should be decided after the harvest.