Crops in Centre’s MSP Proposal for Farmers

What’s in Today’s Article?

• Why in the News?
• About Minimum Support Price (MSP)
• Crops Covered Under MSP
• How Does the Government Decide on the MSP?
• How Can the Government Provide Legal Guarantee for MSP?
• Consequences of According Legal Stature to MSP
• Suggestions
• News Summary

Why in the News?

• During the fourth round of talks with protesting farmers, the Central government presented a proposal for crop diversification in Punjab.
• Under the proposal, government promoted cooperatives would offer five-year contracts to procure five crops — tur (arhar), urad dal, masur (lentil), maize, and cotton — at Minimum Support Prices (MSP).

About Minimum Support Price (MSP)

• In 1966-67, as a part of extensive agricultural reforms, MSP was introduced for the first time by the Central Government.
• Minimum support price (MSP) is a “minimum price” for any crop that the Government considers as remunerative for farmers and hence deserving of “support”.
• It is also the price that Government agencies pay whenever they procure the particular crop from the farmers.
• It is a way of protecting the farmers in India from the uncertainties of the markets as well as those of the natural kind.
• There is currently no statutory backing for these prices, nor any law mandating their enforcement.

Crops Covered Under MSP

• At present, the Central Government sets MSP for 23 crops.
• These include:
  • 7 cereals (bajra, wheat, maize, paddy barley, ragi and jowar);
  • 5 pulses (tur, chana, masur, urad and moong);
  • 7 oilseeds (safflower, mustard, niger seed, soyabean, groundnut, sesame and sunflower);
  • 4 commercial crops (raw jute, cotton, copra and sugarcane).

How Does the Government Decide on the MSP?

• The Government announces the MSP at the start of each cropping season (Rabi and Kharif).
• The MSP is decided after the Government exhaustively studies the recommendations made by the Commission for Agricultural Costs and Prices (CACP).
  • CACP is an attached office of the Ministry of Agriculture and Farmers Welfare.
• These recommendations are based on a pre-fixed formulae. This includes the actual cost incurred, implicit family labour as well as the sort of fixed assets or rent paid by the farmers.

How Can the Government Provide Legal Guarantee for MSP?

• Primarily, there are two ways that the government can provide legal guarantee for MSP. Both have severe economic repercussions:
  • First, the Government can declare MSP as the baseline price for the 23 crops in the market. It’ll be a mandate for private players to pay MSP rates, which may lead to price rise.
  • Secondly, the Government itself can buy all 23 crops at MSP.

Consequences of According Legal Stature to MSP

• A policy paper by NITI Aayog’s agricultural economist Ramesh Chand argues that price level that is not supported by demand and supply cannot be sustained through legal means.
• The paper noted that segments like horticulture, milk and fishery (where market intervention is nil or very little) showed 4-10% annual growth whereas the growth rate in cereals, where MSP and other interventions are quite high, remained at 1.1% after 2011-12.
• Higher procurement cost would mean increase in prices of food grains, leading to inflation, which would eventually affect the poor.
• There also lies practical difficulties in getting the private sector on board for buying at legally guaranteed MSP.
• The paper cited the example of sugarcane – where the support price (Fair and Remunerative Price (FRP)) is the statutory minimum price – and pointed out the accumulation of crores in arrears as private sugar mills could not find FRP for sugarcane matching with sugar prices.

Suggestions

• Provide Direct Income Support:
  • MSP is a short-term solution. It is not a sustainable solution for all of Indian agriculture.
  • Instead of arbitrarily fixing prices of goods in the market, the more effective way might be to provide direct income support to those who are poor — regardless of whether they are farmers or not.
• Investment Boost to Infrastructure:
  • Better irrigation facilities, easier access to credit, timely access to power, creating lots of warehouses, and ramping up of extension services including post-harvest marketing.
  • It is when such facilities are provided — either free or at an accessible price point — that the Indian farmer would become less vulnerable.
• Eliminate Disguised Unemployment in Agriculture sector:
  • The solution to the economic distress of Indian farmers lies outside agriculture. It lies in boosting India’s industrial and services sectors.
  • These are the two sectors that can absorb the excess labour that is engaged at present in extremely unremunerative farm activities and provide them with well-paying jobs.
  • It is only when industries and services sectors grow rapidly for the next couple of decades that India’s farm distress will get alleviated.

News Summary

• The fourth meeting between Union Ministers and farmer representatives to deliberate on their demands, including a legal guarantee for minimum support price on crops, remained inconclusive.
• However, the meeting moved in a ‘positive’ direction as the government proposed to give a guarantee on procuring of five crops on Minimum Support Price (MSP).
• A proposal was discussed in which the government agencies like NCCF and NAFED will get into a contract and buy produce pulses - arhar, tur and urad, and corn from the farmers on MSP.
  • There will be no limit on the quantity.
• Similarly, the government proposed that the Cotton Corporation of India will enter 5-year agreement with farmers to buy cotton crops at MSP.
• However, the protesting farmers have rejected the above mentioned proposals & demanded a legally guaranteed MSP for all crops across the country.

Q1) What is the role of the Commission for Agricultural Costs and Prices?

The Commission for Agricultural Costs and Prices (CACP), set up in 1965, is a decentralized agency of the Government of India (GoI). It is an expert body that recommends the Minimum Support Prices (MSPs) by taking into consideration various factors.

Q2) What is M S Swaminathan famous for?

M S Swaminathan is known as "Indian Father of Green Revolution" for his leadership and success in introducing and further developing high-yielding varieties of wheat in India.

Source: Centre offers contract-based assured buying on MSP for five crops; farmers to get back today | Indian Express