An MSP Guarantee won’t solve the problem of Indian Farmers

Context: Given the experience of states that have diluted or abolished Agricultural Produce Marketing Committee (APMC) mandis, concerns arise that the proposed Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPTC) will make the APMC mandis irrelevant.

Issues with FPTC Act 2020:

• It does not mention government’s position on Minimum Support Price (MSP) and the procurement of food grains by the Food Corporation of India (FCI).

• Farmers’ fears that the FCI will procure grain from traders who would have bought it cheaper from open markets, where there will be no levy of commission and taxes, unlike in APMC mandis.

• It has contributed to the dilution of important issues such as accessibility and efficiency of APMC mandis.

Need of MSP:

• Crucial State Support: It is the only visible and accessible form of state support to agriculture.

• With the withdrawal of subsidies on diesel and complex fertilisers, MSP procurements have helped farmers realise better prices for the crops procured by the government.

• Requirement under the National Food Security Act: The Act mandates MSPs for 23 crops and act as the only support available to farmers since farm gate prices for most crops are declining.
• Prices are likely to go down further due to weakened demand in the economy and a sustained rise in input prices.

Issues with FCI Procurement:

• Higher procurement High food stocks are not just a financial burden on the government, but also create inflationary pressures by withdrawing essential food grain stocks from the open market.
• Skewed regional procurement: Wheat is almost entirely by the five states of Punjab, Haryana, Madhya Pradesh, Uttar Pradesh and Rajasthan. For rice, the top seven states accounted for 81% of all procurement.

• Leading to Environmental Imbalances: Farmers in Punjab and Haryana continue to grow rice despite depletion of water and soil.
• Farmers at the mercy of market: It leaves the majority of crops as well as small and marginal farmers vulnerable, in the absence of support from the government.

Conclusion: 

• MSP-based procurement is unlikely to offer a solution for the low price realisation of most agricultural produce.

• Government needs to enhance storage and logistics infrastructure and regulate APMCs well, not weaken the existing system.
• Improving access to private markets and making them more reliable and transparent is what is needed.