New Delhi: Sanyukt Kisan Morcha and various farmer unions demand legislation by the Centre on MSP, rather than keeping it an indicative or desired price. Farmers are in no mood to relent on the legalization of MSP. Since, PM Modi announced the rollback of three controversial farm laws on Nov 19, against which farmers – mainly from West UP, Punjab, and Haryana have been protesting in NCR borders for over a year.
However, MSP is not a solution rather than a vicious cycle which will only entangle the farmer between the price realization and cost of production. Farm leaders are demanding legal status for the minimum support price (MSP) while it’s a vexed policy issue that requires diligent handling by the Centre.
First, one must not forget the fact that the farm sector in about 54 countries survives on subsidies worth around 700 billion dollars, be it the US, UK, Europe, Japan, or China. China spends the largest amount, four times what the US provides to the farmers.
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Implication of legalizing MSP in India
The government of India only announce MSP on 23 crops only. The total tentative value of the 23 crops is Rs.11.9 lakh crore in 2020-21. But neither the whole produce get marketed nor it is feasible. If we take the average of 75% yield of the total output, then the MSP value of the produce sold by farmers will work around Rs.9 lakh crore, which itself is an astronomical figure on the already beleaguered exchequer. Although, there are few options which can be explored, rather solely relying on MSP only. Since, MSP procurement happens, only in three-four states for selected grains out of which 85 per cent are farmers from Punjab and Haryana.
Help farmers through income support instead of input subsidies
Though the Commission for Agricultural Costs and Prices (CACP) has suggested that farmers get assured return for their produce, while keeping the consumers’ interests intact along with incentivizing the production. The basic requirements being that when MSP should be higher than the market price, then the government must intervene and should procure the harvest. Presently, except for wheat, rice, and cotton MSP carries no meaning for other crops. MSP generally trade below the market prices; hence there is hardly any procurement, so declaring MSPs for so many crops and commodities is useless. Instead farmers can be subsidized through income support rather than input subsidy. It will facilitate the balance between inflation and enhanced income support to farmers in long run. While in case of input subsidies and output pricing, the charge on the budget is almost the same which only benefits a small section of farmers due to their long holding size. While the small and marginal farmers always feel left out. Neither the input subsidies nor the higher crop prices are the remedy for their financial problems. Since, MSP is certainly not, a one size fits all solution, due to the heterogonous nature of farmers in India where the farmers mostly comprises of small & marginal farmers due to their land size.
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Therefore, income support system can prove beneficial to marginal, small, and medium farmers. It also support output the market equilibrium that is beneficial to the consumers and makes the produce competitive in the international market instead of seeking mandatory MSP.
