FARM SUBSIDIES & MSP
INTRODUCTION:
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Cropping Pattern Definition |
Minimum Support Price (MSP) is a form of market intervention by Central Government to insure agricultural producers against any sharp fall in farm prices, by guaranteeing minimum prices for their produce. |
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Subsidies and their objective |
Farm subsidies are governmental aids to farmers, aiming to boost agricultural production, income, and food security through financial assistance and incentives. |
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Quantum of Subsidies |
According to Ministry of Agriculture and Farmer Welfare, farm subsidies make up around 1.5 - 2% of India's GDP, amounting to 21% of their farmers’ income |
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FORMULA BY theIAShub |
↑ MSP Efficiency = ↓ Operational Risk + ↓ Procurement Challenges + ↓ Demand Pressure + ↓ Price Volatility + ↑ Food Security↑ Targetted Farm Subsidies = ↓ Input Costs + ↑ Investment in Agriculture + ↓ Income Variability + ↑ Rural Development |
SPEECHES BY PROMINENT PERSONALITIES (PM, PRESIDENT, UN OFFICIALS et al) /RECOGNITION IF ANY:
- India need 4P’s for agriculture: Parliament, Political leaders, Policy Makers and Press to adopt positive bias towards farming and agriculture: Ex-VP Venkaiah Naidu
- What farmers need are permanent projects and not populist schemes: Ex-VP Venkaiah Naidu
CURRENT DEVELOPMENT:
- Cabinet Committee on Economic Affairs (CCEA) approved an increase in MSP for all the mandated Rabi crops (2022-23) to realign MSPs in favour of oilseeds, pulses and coarse cereals.
DATA/FACT:
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Total Farm Subsidies |
1.5 - 2% of GDP (2022). |
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Food Subsidy |
2 Lakhs Crore |
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Fertilizers subsidy |
1.75 Lakhs Cr. (0.5% of GDP); Only 35% reach targeted beneficiaries (NITI)- indicating diversion |
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MSP |
1/3rd of MSP goes for Wheat and Paddy; Only 6% farmers have access to MSP (NSSO) |
KEYWORDS:
- BODY: Paradox of hunger amidst plenty; Cereal Centric Govt. Policy & Middlemen Centric Institutional set up;Climate Smart Agriculture, Weather-proofing agriculture, Precision agriculture, Regenerative agriculture.
- CONCLUSION: ‘From Traditional condition-based subsidies to Trust-Based Innovation Inducing Incentives’; From ‘National with a begging bowl’ to the ‘Food Basket’ of the world’; From ARYA (Attracting and Retaining Youth in Agriculture) to MAYA (Motivating & Attracting Youth in Agriculture)
COMMITTEES RECOMMENDATIONS/NATIONAL OR INTERNATIONAL REPORTS:
- Swaminathan: MSP: C2 + 50% formula (C2 = imputed cost of capital + rent of land); Expand coverage of MSP
- Ashok Dalwai: Adopt Direct cash transfer in place of subsidies; free input prices to market level,
- Shanta Kumar: Allow private players in food grain storage and management; Stop Bonuses on MSP paid by state government; Deregulate fertiliser industry and give farmers cash transfer of Rs 7000 per hectare.
GOVT SCHEMES, POLICIES AND INITIATIVE:
- MSP Reforms: PM- AASHA; Expansion of coverage
- For better agricultural Inputs: - PM KISAN; Rastriya Krishi Vikas Yojna and its sub-components; Fertilizer- Nutrient Based Subsidy, PM PRANAM scheme; Power- KUSUM,
EXAMPLES/CASE STUDIES:
- Bhavantar Bhugtan Yojana by MP Government: DBT to farmers the difference between the MSP and the selling pric
CONCLUSION
- MSP can be considered as “Food for Agriculture” in India. To make MSP viable and sustainable, there needs to be a shift from Cereal centric MSP to Farmer centric MSP.
- MSP acts as a safety net, shielding Indian farmers from the volatility of market prices. Hence, the focus must be on broadening the beneficiaries rather than just number of produces in the list.
- There is, thus, a need to devise long term alternatives to subsidies, ie. convert subsidies to capital investments, as recommended by Kelkar committee.
FARM SUBSIDIES & MSP : MICRO DIAGRAMS
NEED FOR AGRI SUBSIDIES & MSP
MSP CHALLENGES
