{"id":78152,"date":"2021-01-25T12:14:29","date_gmt":"2021-01-25T06:44:29","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=78152"},"modified":"2021-01-25T19:38:56","modified_gmt":"2021-01-25T14:08:56","slug":"the-cost-of-guaranteed-msp","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-cost-of-guaranteed-msp\/","title":{"rendered":"The Cost of Guaranteed MSP"},"content":{"rendered":"<p><b>Source: <\/b><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-the-cost-of-guaranteed-msp-7157934\/\"><span style=\"font-weight: 400;\">click here<\/span><\/a><\/p>\n<p><b>Syllabus: <\/b><span style=\"font-weight: 400;\">GS 3<\/span><\/p>\n<p><b>Synopsis: <\/b><span style=\"font-weight: 400;\">Farmers want to guarantee MSP which has no legal backing as of now. It is feasible and won&#8217;t cost very high for the government.\u00a0<\/span><\/p>\n<p><b>Introduction\u00a0<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Farmer unions are protesting to achieve two fundamental demands.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"><strong>The first demand<\/strong> is to take back the three agricultural reform laws enacted by the Centre.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"><strong>The second demand<\/strong> is to provide a legal guarantee for the minimum support prices (MSPs).\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<p><b>How can MSP be made legally mandatory?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">This can be done in 2 ways:<\/span><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\"><b>First<\/b><span style=\"font-weight: 400;\">, <\/span><b>the private buyers are enforced to pay<\/b><span style=\"font-weight: 400;\"> it and then no crop can be bought below the MSP. It would also act as the floor price for bidding in mandi auctions.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"><strong>For instance,<\/strong> in sugarcane, mills have to pay farmers the Centre\u2019s \u201cfair and remunerative price\u201d within 14 days of supply as per the law.\u00a0<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Second,<\/b> <b>the government itself has to buy<\/b><span style=\"font-weight: 400;\"> at MSP, the entire crop that farmers grow.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><b>How much of farmers\u2019 produce can the government buy at MSP?<\/b><\/p>\n<p><b>MSP is currently applicable on 23 farm commodities<\/b><span style=\"font-weight: 400;\"> including 7 cereals, 5 pulses, 7 oilseeds and 4 commercial crops. The MSP value of all 23 commodities was around Rs 10.78 lakh crore in 2019-20.<\/span><\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">However, the entire produce is not marketed as farmers retain a part of it for self-consumption, as a seed for the next season\u2019s sowing and for feeding their animals.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Therefore, the <\/span><b>MSP value for the marketable crop<\/b><span style=\"font-weight: 400;\"> which farmers actually sell would be around <\/span><b>Rs 8 lakh crore.\u00a0<\/b><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><b>What would be the government expenditure to ensure MSP?<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The earlier mentioned amount will not be the amount the government has to spend because of the following reasons:\u00a0<\/span><\/p>\n<ul>\n<li><b>Firstly<\/b><span style=\"font-weight: 400;\">, sugarcane should be excluded from the calculations. <\/span><b>MSP for sugarcane is paid by sugar mills and not the government.<\/b><\/li>\n<li><b>Secondly<\/b><span style=\"font-weight: 400;\">, the <\/span><b>government is already buying several crops<\/b><span style=\"font-weight: 400;\"> like paddy, wheat, cotton, pulses and oilseeds which made the combined MSP value of these crops more than Rs 2.7 lakh crore in 2019-20.<\/span><\/li>\n<li><b>Thirdly,<\/b><span style=\"font-weight: 400;\"><strong> the Government need not buy the entire produce of farmers<\/strong>. Even if the government buys a quarter or third of the crops available in the market, it is enough to lift the prices<\/span><b>.<\/b><span style=\"font-weight: 400;\">\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For example, CCI has so far bought 87.85 lakh bales of cotton out of the current year\u2019s projected crop of 358.50 lakh bales. This has led to open market prices crossing the MSPs.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Fourthly<\/b><span style=\"font-weight: 400;\">, the <\/span><b>crop bought by the government also gets sold.<\/b><span style=\"font-weight: 400;\"> The profits gathered from sales would partially balance the costs from MSP procurement.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li><b>Lastly,<\/b><span style=\"font-weight: 400;\"> the maximum amount the government has to spend on buying crops to guarantee MSP to farmers, will not be more than <\/span><b>Rs 1-1.5 lakh crore per year.<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Government buying crops at MSP is a better option rather than forcing private buyers.<\/span><\/p>\n<p><b>Way forward<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Economists suggest guaranteeing minimum incomes instead of minimum prices to farmers. This can be done by direct cash transfers either on a flat per-acre like done in the Telangana government\u2019s Rythu Bandhu scheme or per-farm household basis, under the Centre\u2019s Pradhan Mantri Kisan Samman Nidhi.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: click here Syllabus: GS 3 Synopsis: Farmers want to guarantee MSP which has no legal backing as of now. It is feasible and won&#8217;t cost very high for the government.\u00a0 Introduction\u00a0 Farmer unions are protesting to achieve two fundamental demands.\u00a0 The first demand is to take back the three agricultural reform laws enacted by&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/the-cost-of-guaranteed-msp\/\">Continue reading <span class=\"screen-reader-text\">The Cost of Guaranteed MSP<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":78292,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[1285],"class_list":["post-78152","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","category-public","tag-agri_0","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2021\/01\/The_Cost_of_Guaranteed_MSP.jpg?fit=1200%2C800&ssl=1","views":{"total":121,"cached_at":""},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/78152","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=78152"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/78152\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/78292"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=78152"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=78152"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=78152"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}