Tyranny of the Mandi, MSP regime

Context: Government’s agricultural reforms allow for greater access to investment, job creation in the rural sector along with rectifying the deficiencies of the distorted and exploitative MSP regime.

Concerns with the Minimum Price Support (MSP) regime:

• Collusion and corruption: results in hardship and lower than MSP payment to farmers, instead of saving farmers from price fluctuations and exploitation by the traders and middlemen.
  • Most small farmers sell their produce in local markets at below MSP prices.
• Distorting farming patterns: in favour of wheat and rice crops, as MSP applies to 100% produce in rice and wheat farming, while it applies to 25% of the produce in a number of other crops.
• Huge stockpiling and wastage: As in many agriculture-dependent states, the Food Corporation of India is unable to execute the growing quantity of MSP crop procurement.
• Financial difficulty to state governments: due to the FCI’s failure in procuring from them, leading to delayed payments to farmers due to political reasons.
• Smaller farm holdings (less than two hectares) and large agriculture-dependent population: unlike the USA where only 2% population is agriculture-dependent.
  • Smaller farms mean less produce and no power in the hands of the producer to dictate pricing and lack of market intervention leave them at the mercy of the mandis and MSP.

Benefits of the farm laws:

• Better profits to the farmers: by allowing market forces to make a direct intervention
• Provides safeguards: market investments will have a right over the crop only, not on the land or other assets of the farmer.
• Will attract youngster: Prospect of Agriculture as a profitable profession will drive educated youngsters to villages with energy, enthusiasm and equipment.
• Facilitates the creation of allied activities: like cold chains, processing units and warehouses.
• Creation of new jobs in the rural sector: small farmers can do better by being tillers in their own land and participants in allied activities outside.
• Will help change and diversify crop patterns.

Conclusion: Present set of agricultural reforms is forward-looking and progressive that will allow greater investment infusion to make agriculture a profitable profession for farmers.