MSP

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As mandated, the Commission for Agricultural Costs and Prices (CACP) recommends MSPs at national level for twenty three crops, but effectively price support operates primarily in wheat and rice and that too in selected states. Examine the consequences and effectiveness of measures taken by the government to address this issue. (200 Words)

The commission for agriculture costs and prices recommends Minimum Support Prices (MSP) for twenty three crops to union government at national level. But the two major fallouts of green revolution i.e. its limitation to wheat and rice and covering only some parts of India where irrigation resources were available have rendered the effectiveness of price support to rice and wheat and that too in selected states.
Even in these states the major beneficiaries are big-farmers as they have resources for huge surplus production and their pressure on state governments for procurement of their produce. To address this issue Government has taken following measures with their consequences:
  1. It is trying to rationalise the price support offered to different crops, but this will work effectively if state governments also limit their support above MSPs.
  2. It is decentralising the procurement of food-grains for PDS to state governments and limiting their share to the requirement of their own state’s PDS. By doing this monopoly of states can be broken and every state will have its own share of procurement. This has dual benefit of reducing transportation cost and providing income security to poor region’s farmers.
  3. It is asking states to procure food from small-farmers though no effective and targeted policy is introduced in this direction.
  4. Many schemes for increasing the production of other crops like oil-seeds and pulses are been initiated and scope of green revolution is expanded to include hitherto untouched area. It will have many positive consequences if implemented effectively.
  5. Online procurement monitoring system is being developed to provide daily information of procurement countrywide.
India has achieved food security as a result of green-revolution but its ill-effects are need to be solved by correcting the balance of crops grown and inter- state parity.
Farmers‘ unions and political parties have been demanding the  implementation of the Swaminathan minimum support price (cost  plus 50%) to address agrarian crisis and farmers‘ distress. Do you think implementation of this recommendation alone would address the agrarian crisis issue? Critically examine. (200 Words)
Agrarian issues have been one of the most haunting issues in India even from the British time. Several commissions have been appointed till date to find solutions in the agriculture sector. The National Commission for farmers led by Mr. Swaminathan was one such commission. Swaminathan MSP, which recommends total cost plus 50% of the cost to be given as the MSP, is one of its major recommendations.
But implementation of Swaminathan MSP seems almost impossible and seemingly does not end the agrarian distress because of the following reasons:
  1. Mechanically finalizing MSP with regards to the cost of production alone does not seems proper. One needs to consider several factors such as its impact on cost of living, world market rate, change in raw materials cost and availability to name a few.
  2. Simply increasing MSP to 50% will only benefit farmers producing high quantity of farm produce. Most of the Indian farmers follow subsistence farming, so increasing MSP alone will not bring a drastic change in their lives.
  3. Already developed countries are unhappy with Indian subsidies as evident from the Doha development round talks. They are pressurizing India to reduce subsidies. Such an increase in MSP would again make issues in different economic forums.
  4. Increasing MSP would result in farmers giving their produce to the govt. agencies like FCI, which would result in increase in dumping of food grains in govt. go downs than making them available in consumer market.
  5. Increasing MSP would lead to increase in cost of other consumer goods which would again result in poverty.
  6. MSP will not benefit for the long term. It will only provide marginal increase in profit for a short time.
In effect, increasing MSP will not address the agrarian distress prevailing now. Rather than focusing on MSP, govt. should take steps to benefit the farmers in the long time. These include a rapid change in farm technology , increasing the skill set for the farmers, absorbing the agrarian sector workers to the other sectors to name a few.
Critically analyse the interrelationship between government‘s minimum support price scheme, cropping pattern and crop production in India. (200 Words)
Ensuring assured price support through mechanism of Minimum Support Price (MSP) has played a crucial role in green revolution which made country self-sufficient in food production.
MSP continue play an important role in deciding cropping patter and crop production in India as is evidence from followings:
  1. Farmer‘s response to government price support by increasing production of cereal during the green revolution.
  2. Even the traditional water deficient state like Punjab and Haryana become major producer of Rice due to high MSP.
  3. In recent years, the state bonus has played a role in increasing production of paddy in Chhattisgarh and wheat in Madhya Pradesh
  4. The high state advised price for sugarcane in UP and Maharashtra has been factor in high crop acreage under sugar cane in these regions.
  5. The low productivity and low MSP along with absence of procurement mechanism and infrastructure for purchase of pulses and oil seed has been reason for their low area and low production.
  6. Cultivating a hectare of land of Cereals give an average output of 2400 kgs , whereas cultivation of pulses on the same land would yield only about 750 kgs
  7. Profitability :- A farmer would earn about Rs. 38000 for every hectare of Jowar grown in comparison to Rs. 33000 that Urad Dal would give him
  8. These differences are not entirely due to MSP. Factors like technological advance and R and D in production techniques have a huge role to play. R and D in pulses hasn’t progresses as much it has in rice and other cereal crops.
  9. Additionally, due to increased Profitability in cultivation of cereal crops, pulses are cultivated on less fertile and marginal lands.
These factors have largely influenced crop production and cropping pattern in India. Despite the fact that India imports one-fifth of its pulses from abroad and pulses having an inflation rate higher than average food inflation rate, these differences indicate the many fault lines that lie within intra – food crop MSP levels. These differences need to be ironed out to make India equably produce food crops across the spectrum based on local needs and priorities.
Do you think India‘s minimum support price policy (MSP) is a sound policy vis a vis increasing efficiency in agriculture? Critically analyse the merits and demerits of present MSP policy. (200 Words)
 
Minimum support price was introduced by the government in 1960’s in the wake of Green revolution. It is the minimum price at which government buys crops from the farmers and is announced before the sowing season. Presently MSP is being announced for more than 20 crops but main emphasis remains of two crops i.e. rice and wheat.
Arguments supporting MSP
  1. Provides an economic assurance and security for the farmers and motivates them to grow targeted crops.
  2. Production of targeted crops increases. For example India once an importer of Wheat is now one of the largest producers of it and has huge surplus stocks catering to both domestic and international demands. Increase in exports of food grains helping on to reduce CAD is another advantage of it.
  3. Increased production also helped in achieving food security and catering to the requirements of National food security act.
  4. With farmers having adequate knowledge of MSP they can’t be exploited by middlemen for lower prices.
  5. It motivates Farmers to take steps to increase production as government assured to procure unlimited produce at the announced MSP.
Arguments against MSP
  1. Has distorted cropping pattern. MSP have resulted in crops like rice being grown in Punjab and Haryana which are not suitable for it. This impacts soil health and results in problems like overexploitation of ground water, alkalinity, etc. and decreases productivity in the long run.
  2. As MSP mainly focuses on rice and wheat therefore it have resulted in attainment of food security at the cost of nutrition security (pulses etc.).
  3. Governments increasing MSP every year due to one or other reasons have also resulted in conflicts. Example of fights between sugar cane growers and mill owners is a case in point.
  4. All farmers are not being able to take the benefits of MSP because of reasons like low awareness about the prices, no connectivity etc. and continues to be exploited by middlemen.
  5. Bone of Contention in Agreement of Agriculture at WTO, though the issue is resolved temporarily.
  6. Impact of Inflation: MSP to include cost of production and profitability for farmers and be linked to the index of inflation
  7. The proposal to set MSPs at 50 per cent above the weighted cost of crop output – agriculturally advanced areas in NW will benefit more where the cost of production are high due to costly inputs. Also, rich farmers will benefit more than the poor and small ones. Also, there will be no incentive to farmer to adopt better practices and innovative methods to reduce the cost of production
  8. Private investment in agriculture will not be forthcoming because private sector will feel that govt. will interfere in setting MSP.
Steps should be taken to rationalize agricultural subsidies, incentivize investment in farming and create a more level playing field for big and small farmers alike.

 

 

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