C M Sharma
A product of the five essential life sustaining compounds, i.e. the Earth, water, air, fire and the space or ether, food has the highest value as compared to all others. The concept of Minimum Support Price (MSP) aims at bringing the value of food grains and other food crops on the price scale comparable with the industrial products. But, is it ethical to compare the value of food grains and other food crops with the costs and prices of industrial products, or even the essentials like clothing and shelter?
It was a taboo in ancient India to sell land and food. In modern times however, even the space, air and water are being sold! Isn’t it ironical, that the people of affluence, proud of their rich tradition of free bhandaras and free langars, demand ever increasing price for agricultural produce, unmindful of the fact that merely 10 to 15 percent of the farming population produces the major bulk of agricultural commodities for consumption by almost the entire national population. It also includes 85 to 90 percent of farming families that are small and marginal and produce little. The MSP on all crops will raise their market price to become economically unbearable, particularly for the poorer sections and labour classes of the country who are presently surviving on highly subsidised food grains under the nationwide network of Public Distribution System?
Pros and Cons of MSP
The demand for granting legal guarantees to fixation of MSP for all agricultural crops and their procurement by the government has become louder and fiercer during the past few years. Presently, the MSP is fixed by the Central Government for 22 mandated crops of kharif and rabi seasons, but only a few foodgrains like rice and wheat are substantially procured from farmers for the Central Pool of foodgrains, through the Food Corporation of India and the State Governments and their agencies. The central pool is used for providing foodgrains under the Public Distribution System (PDS) and other welfare schemes, and also kept as reserve in the form of buffer stock.
Three states (Madhya Pradesh, Punjab, and Haryana), producing 46% of the wheat in the country, account for 85% of its procurement. For rice, six states (Punjab, Telangana, Andhra Pradesh, Chhattisgarh, Odisha, and Haryana), with 40% of the production, have 74% share in procurement. Rice and wheat being the primary foodgrains distributed under PDS and stored for food security urgent need is felt to diversify the commodities distributed under PDS over a period of time, so that farmers growing other crops also, are covered under MSP regime.
Farmers are more likely to grow pulses, millets, and other nutrient-dense, less water-intensive crops than rice, wheat, or sugarcane if they are assured of MSP on the former. The National Food Security Act, 2013 requires the central, state, and local governments to strive to progressively realise certain objectives for advancing food and nutritional security and one of these objectives involves geographical diversification of the procurement operations.
It is an irony once again, that even the UPA government in the past found itself helpless and unable to agree to the demand for extension of MSP to private trade and guarantee MSP to farmers on all kinds of agricultural trade, but in their new incarnation as constituents of the INDI Alliance, they are vouching to concede to the farmers’ demands after the Lok Sabha elections 2024.
One can’t totally deny the contention of agitating farmers that prevailing market conditions favour buyers over sellers and they lack the market power to influence the prices of their produce. They can’t even set the MRP (maximum retail price), as firms in most industries do and therefore, sell at prevailing supply-and-demand-determined rates. However, it may not require much explanation that assured procurement by government, of all the major and minor crops, appears economically and physically unfeasible, because governments of the country don’t have any control over the cropping systems followed by farmers over seasons and years. Moreover, a foolproof system of data collection and data management for produce and market arrivals of several crops is yet to be developed.
Undoubtedly, the seasonal bulk production, harvesting and marketing, leading to sudden increase in supplies as compared to demand, storage and post-harvest facilities, remains at the centre of the crisis, putting downward pressure on prices.
Methods tried to Provide Income
Support to Farmers
Various methods, considered by experts and tried by the union and the state governments over the years, to assuage the sufferings of farmers on this account are briefly described hereunder:
Price versus income support
Economically, the government-fixed MSPs based on cost-plus pricing, sans any consideration to market demand, is irrational. Farmers must plant what the market wants, as reflected in the prices for various crops at a given point in time. Cost-plus MSPs result in the oversupply of favoured crops and an undersupply of others. Economists largely believe that it is better to give farmers “income”, instead of “price”, support. Accordingly, the Modi led union government is transferring a fixed sum of Rs. 6000/- annually into the bank accounts of farmers, on a per-farmer basis under PM-Kisan Samman Nidhi). In Telangana, there is Rythu Bandhu Scheme of money transfer on per-acre basis.
These direct income support schemes aren’t market-distorting and benefit all farmers, irrespective of which crop they grow in whatever quantity, and sell to whomsoever at any price. However, the flip side to everyone being paid the same money is: where does this leave the real producing farmer, who invests more resources, time, and effort in the field?
The real producing farmers will appear to be more justified in seeking a price assurance for the crop they sow and harvest at maturity after some months. Such farmers are more exposed to both price and production risks (from weather, pests, and diseases) and therefore, could be more deserving for MSP guarantee. Price support for some more select crops will promote crop diversification as well.
Guaranteeing MSP
* The Government can force buyers to pay MSP. E.g., Sugar mills are required, by law, to pay cane growers a “fair and remunerative” or “state advised” price within 14 days of purchase. But this approach risks implementation hurdles (recurrent cane payment arrears are proof), or worse, the private trade choosing to not buy at all.
– Government agencies can directly buy the entire marketable produce of farmers offered at MSP, but that is unsustainable, both physically and fiscally.
– In October and November 2020, the non-NDA Governments in Punjab and Rajasthan respectively had passed Bills to counter the three central farm laws, but due to various reasons, both these bills remained a non-starter.
– Haryana launched a scheme in 2020 to provide Rs 7,000 per acre to those farmers who will use more than 50% of their paddy area (as per the area sown in 2019-20) for other crops like maize, bajra, pulses, or cotton in such diversified area. Further, the crop produce grown in such diversified area under the scheme is liable to be procured by the state government at MSP.
Price deficiency payments (PDP)
The PDP model was tried out first in Madhya Pradesh through a Bhavantar Bhugtan Yojana. Under this scheme, the market price for a crop was its average modal (most-quoted) rate in the Agricultural Produce Market Committee (APMC) mandis of Madhya Pradesh as well as two other growing states during the particular month of sale. The price difference vis-à-vis the MSP was payable on the actual quantity sold by the farmer, backed by an “anubandh patra” (sale agreement with trader), “tol parchi” (weighment slip), and “bhugtan patra” (payment letter signed by both parties). The scheme was implemented during the 2017-18 kharif (post-monsoon) season for urad (black gram), soyabean, maize, arhar (pigeon pea), moong (green gram), groundnut, sesame, and nigerseed. 21 lakh-odd farmers were registered under the scheme and payments of about Rs 1,952 crore was made. The government was not physically purchasing or stocking any crop, but simply paying farmers the difference between the market price and MSP, if the former is lower. Such payment would be on the quantity of crop they sell to the private trade.
Bhavantar Bharpai Yojana (BBY)
in Haryana
Haryana’s PDP scheme, called Bhavantar Bharpai Yojana (BBY), is being implemented mainly in bajra (pearl millet), mustard, and sunflower seed, although technically it also covers groundnut, chana (chickpea), moong, and 16 vegetable and 3 fruit crops. BBY operates on the Haryana government’s ‘Meri Fasal, Mera Byaura’ portal, in which farmers have to register themselves along with details of their land (village name, khasra plot number, holding size, etc) and area sown under different crops.
Haryana has opted for a mix of both physical procurement and PDP under BBY. In 2020-21, the state government directly procured 7,76,909 tonnes of bajra and 16,952 tonnes of sunflower at MSPs of Rs 2,150 and Rs 5,885 per quintal respectively. In subsequent years, Haryana has undertaken both, depending on the gap between the MSP and market price. If the difference isn’t too large, the government undertakes procurement to push up the market price closer to MSP and covers the rest through PDP. If the difference is too high, then PDP only is followed.
The possible road ahead
Both Madhya Pradesh and Haryana have demonstrated the feasibility of delivering MSP to farmers at least in some crops other than rice, wheat, and sugarcane. One reason they have been able to do this is because of the already-created APMC mandi infrastructure and systems for farmer registration in these states. This makes it possible to record each transaction – what quantity of any crop a farmer has sold at a certain price – and to pay the difference vis-à-vis the MSP based on that.
If a nationwide PDP scheme with 50% Central funding were to be implemented, it can perhaps incentivise other states to follow the examples of Madhya Pradesh and Haryana. They could, for a start, build the market infrastructure and systems that would ultimately enable even their farmers to get MSP, whether by law or otherwise.
Obviously, the ethical questions apart, rational and pragmatic approach in the matter demands that the Union and the State Governments must sit together in a purely professional environment and take appropriate measures to evolve and implement a mechanism that provides the much-needed income support to producer farmers of the country, without in any way hurting the genuine economic interests of ultimate consumers, who form a vast majority.
The ‘dialogue and brainstorming strategy’ alone is the way out to bring a big relief and respite to the citizens of this country. They don’t want strife and discord all the time.
(The author is a retired Dy. Director
of Agriculture, J&K Government, Jammu)
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