Misunderstanding the MSP

Context:  Mere amendment to the new farm laws and assurance on maintaining Minimum Support Price (MSP) cannot resolve farm issues.

Purpose of MSP and Public Procurement System (PPS)/ Agricultural Produce Market Committee (APMC):

• In the Past: During the Green revolution, it was to incentivize farmers to produce cereals and to assist the country in achieving its goal of food self-sufficiency.
• At Present: To maintain food self-sufficiency and to ensure a reasonable and assured income for marginal (< 1-hectare land) or small (between 1 and 2-hectare land).

A thrust towards the removal of MSP and PPS: has been put forth by -

• Several pro-government and pro-agro-business economists argue for scrapping MSP.
• Shanta Kumar Committee in its 2015 report, recommended for the dismantling of Food Corporation of India (FCI) public procurement.

Issues faced by the government over MSP and PPS:

• On the continuation of MSP and PPS: If you have MSP but not compulsory PPS, the support price becomes redundant, and With no time-bound purchase, MSP will fail.
  • E.g. the absence of timely purchase of vegetables in Madhya Pradesh led to farmers feeding cauliflower and aubergine to their animals.
• On the co-existence of big-agribusiness and MSP/PPS:
  • Legal restrictions: A farmer entering into a contract with a private trader cannot legally access APMC mandi. (even when it offers better prices.)
  • Flawed dispute resolution mechanism: The proposed dispute resolution mechanism increases the choice of the trader to trade and not of the farmer to sell.
  • Multiple laws: The central law for private markets and state laws for APMC mandis. This may create conditions for perpetual Centre-state conflicts.
• On the inadequacy of MSP: Timely procurement is available only for wheat and rice.
  • E.g. the average market price received by farmers for Maize was Rs 1,250/quintal in Bihar (MSP was 1,760/quintal for 2019-20)
• Lack of consensus in defining MSP: MSP announced by the government is based on the A2+Fl+50 % formula, while the farmers want the C2+50 % formula, which covers all the costs of farming.

Conclusion:  Creation of inclusive, transparent and well-informed laws is required along with the Agrarian reforms that recognize the importance of ecologically and economically sustainable agriculture.