Why MSP is Must For Farmers

Context: Minimum Support Price (MSP) is imperative for increasing the income of farmers and strengthening their position in the agricultural market.

Arguments in favour of MSP

• MSP mitigates the impact of open market fluctuations:
  • Small farmers sell their crops to local merchants (in the absence of adequate mandis) who offload sell at the MSP and pay assured price to farmers.
  • If grain traders were exposed to the fluctuations that take place in agricultural markets across the world, the small farmers would get even less.
  • For e.g., farmers sell onions at Re 1/kg to the trader and the consumer paying Rs 30 for it due to the absence of assured pricing (through MSP) in vegetables.
• Reduces the adverse impact of mismatch in supply or demand trends: of agricultural commodity by ensuring a steady income for farmers (thereby reduces chances of bankruptcy and farmer suicide)
  • Unlike factories, agriculture cannot react to changes in demand or overall supply in the market very quickly due to seasonal lag.
  • That is why even the developed capitalist world, where free markets supposedly rule, subsidises its farming communities.

Issues with the farm laws:

• Render farmers powerless in front of big corporates:
  • Purchase contracts will have to be agreed to before the sowing season.
  • The farmer will have to ensure that the quality of the crop meets the contracted standards.
  • The buyer will have the right to terminate the contract whenever he wants.
  • If there’s a dispute, the farmer will not be able to go to any civil court.
• Threat of monopsonies: The complexity of crop procurement will ensure that a few big corporates may quickly capture the market and become monopsonies.
  • The corporates will dictate prices and farmers will have no fallback option in the absence of MSP.

Conclusion: Setting up an adequate number of Agriculture Produce Marketing Committee mandis (5 times the current), reducing control of arhtiyas and strengthening MSP-based procurement will help in increasing the income of farmers.