FARM SUBSIDIES & MSP

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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FARM SUBSIDIES & MSP : REVISION CARD

INTRODUCTION:

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.
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.
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

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:

Total Farm Subsidies	1.5 - 2% of GDP (2022).
Food Subsidy	2 Lakhs Crore
Fertilizers subsidy	1.75 Lakhs Cr. (0.5% of GDP); Only 35% reach targeted beneficiaries (NITI)- indicating diversion
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

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