Is legal MSP a solution to farmer income disparity
As the general elections draw closer, agrarian concerns have once again taken centre stage.
Farmers from the heartland of the Green Revolution have travelled to the border of the capital to not only voice their distress, but also to shape the electoral discourse.
The ruling dispensation, sensing adverse electoral implications, attempted to reach out to the farmers.
It said it was ready to procure pulses, maize, and cotton at MSP, but this was contingent upon farmers guaranteeing crop diversification.
However, these efforts were rejected as the core issues were not addressed, say farm leaders.
The perennial issue of fair pricing of farm produce reigns supreme, now coupled with calls for legal assurances of Minimum Support Price (MSP).
However, beyond mere legal mandates lies the pressing concern of maintaining self-sufficiency in food production and addressing the ongoing challenge of distribution.
This underscores the ethical imperative of anchoring a legal guarantee for MSP.
Minimum Support Price for farmers
The Minimum Support Price is a system implemented by the government of India to insure agricultural producers against sharp falls in farm prices.
It's a type of market intervention.
The government announces MSPs for certain agricultural products at the beginning of each sowing season.
These prices are based on recommendations from the Commission for Agricultural Costs and Prices (CACP).
The CACP considers factors like the cost of production, market prices, and supply and demand.
If the market price for a particular crop falls below the MSP, the government agencies intervene and procure the crop at the MSP from the farmers.
This ensures that farmers get a minimum price for their produce, even if the market price is low.
To provide price support to farmers and to incentivize increased agricultural production.
To ensure food security for the country by encouraging farmers to cultivate essential crops.
The objectives of the MSP system:
To stabilize market prices of agricultural products.
The Problem - Argument for Legal MSP
The MSP is announced annually for 23 crops covering both the kharif and rabi seasons.
Well in advance of sowing, with 21 of them being food crops.
However, despite the announcements, the implementation of MSP remains poor.
Only 6% of farmers, primarily those cultivating paddy and wheat in States such as Punjab, benefit from MSP.
Most transactions involving these essential food commodities occur below the MSP.
Rendering farming economically unviable for the majority of producers in India.
As a result, farmers are trapped in a dangerous cycle of produce and perish.
Leading to crippling debt and deaths by suicide.
All these emphasise the pressing need to ensure MSP, including the one recommended by the eminent agricultural scientist M.S. Swaminathan (with a 50% profit margin).
Several articles under the Constitution, as well as the United Nations Declaration on the Rights of Peasants, support the legal recourse to guaranteeing MSP.
According to a recent opinion survey by an English TV channel, 83% of landowners and 77% of farm labourers expressed solidarity with the agitating farmers.
Notably, 64% of the public also endorsed the farmers’ demand for a legal right to MSP.
Examples and Solutions – Counterarguments
A minor amendment to respective State APMC Acts or the Centre’s Essential Commodities Act would suffice to introduce a law ensuring that no transactions of farmers’ produce occur at prices below the MSP.
The budget outlay will not be as large as projected if legal recourse to MSP is accompanied by essential backward and forward linkages.
Crop planning, market intelligence (including price forecasts), and other pre-sowing measures,
along with the establishment of post-harvest infrastructure for efficient storage, transportation, and processing of farm commodities, greatly assist in managing the post-harvest glut in the market.
Therefore, a legal route to MSP, complemented by the development of such linkages, would provide protection against “market failures” in addressing the surplus, rather than leading to “market distortion,” as claimed by some mainstream economists.
Even enhancing MSP to provide a 50% profit margin over total cost is not challenging, considering that current margins already stand at around 22%.
Finally, effective procurement and distribution, as envisaged under the National Food Security Act, 2013, is the most appropriate means to not only ensure MSP but also address hunger and malnutrition.
The PM-AASHA comprises schemes for price support and price deficiency payment, along with incentives to private traders to ensure MSP.
While it possessed all the necessary elements as precursors to guarantee the MSP.
Its side-lining in policy circles highlights how political expediency rules the roost.
At present, farmers hardly get 30% of the price paid by the consumers; this will increase if MSP is guaranteed.
Establishing a legally binding MSP will anger intermediaries as their share will get reduced.
Often, government intervention, and particularly a legally binding MSP, is deemed a problem.
It is this adherence to free market dogma that is preventing a just solution to the ongoing crisis in farmer incomes.
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