Dr. Pawan Kumar Sharma, Dr. R.K. Arora
Indian agricultural price policy has its roots developed since independence with the specific objectives of safeguarding farmers against decline in prices of important crops and safeguarding consumers against excessive rise in prices. The price risks of farmers have been protected by provision of remunerative prices to farmers through announcement of minimum support price and that of consumers’ by undertaking procurement for distribution through the public distribution system.
The major breakthrough in the price policy was the establishment of Agricultural Price Commission (APC) set up in 1965 for announcement of both procurement and minimum support prices in the successive years to assure minimum prices to farmers and to build up buffer stocks for public distribution system.
The APC renamed as Commission for Agricultural Costs and Prices (CACP) since 1985, recommends MSPs of around 23 commodities including cereals, pulses, oilseeds and commercial crops based on demand and supply, cost of production, price trends in the market, both domestic and international, inter-crop price parity, terms of trade between agriculture and non-agriculture and likely implications of MSP on consumers of that product.
Well, like any other government policy, the success of price policy lies in the secret of its effective implementation. The major criticisms of minimum support policy in all these years from farmers’ perspective remains the limited operation of policy with coverage of mainly rice and wheat crop and exclusion of farmers residing in remote areas.
The coverage of mainly two crops i.e. wheat and rice actually does not undermine the importance of MSP, as the fact remains that farmers in different years need support of MSP in these two crops only due to large marketed surplus. The price prevailing in open market for pulses and oilseeds stayed remunerative, even after the enhancement of their MSP by the Government at several times. The coverage of remote farmers, of course, remain a serious concern, which have been solved with creation of awareness and participation of more and more farmers.
In fact, the implementation of procurement policy for paddy and wheat in Jammu district in the year 2010 and for maize in Poonch district of Jammu & Kashmir in 2016 is an example of increased marketed surplus and awareness on part of farmers to obtain remunerative price through Government interventions.
Now, realise the trade-off in agriculture with biggest dilemma of achieving optimum price for essential foodgrains, which would suit both farmers and consumers. Some economists advocate consistent increase in MSP due to increased cost of agricultural inputs, whereas others argued that such continuous enhancement would result in inflation. Again, the increase in the price of foodgrains would affect the marginal farmers and landless labourers who constitute the bulk of rural population.
In recent years, the issue of ‘MSP’ highlighted in context of recommendations made by Swaminathan Commission report for setting Minimum Support Price for grains at production cost plus 50 percent, keeping in view the risk of climate change and loss of professional attraction in agriculture. The present government has implemented the recommendations by announcing MSPs of 14 kharif/post monsoon crops by applying the 1.5 times formula. The MSP of paddy has been fixed at Rs. 1750 per quintal which is 1.5 times the projected cost of paddy i.e. Rs. 1166 per quintal. The technical part here is that the Rs. 1166 is the Cost A2+ FL (all paid-out costs directly incurred by the farmer on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc. + imputed value of unpaid family labour) and not the Cost C2 (Cost A2+ FL+ rentals and interest forgone on owned land and fixed capital assets), which was actually proposed for an increase by 1.5 times.
Now, how far the government can increase the MSP, keeping in view the trade-off between farmers and consumers in agriculture, is the problem to evaluate at macro level. However, the criticism that the given implementation would not be helpful for farmers is not right by any stretch of the imagination.
At the moment, the major challenge for the government is to augment the outreach for expanding the benefits of newly enhanced MSP policy to the farmers in remote and backward areas of the country.
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