• UGI USER
  • Mar 20, 2024
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GUARANTEED MSP IS AN ETHICAL IMPERATIVE

Syllabus:

GS 2:

  • Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

Focus:

  • As general elections approach, agrarian issues have gained prominence.
Source:- The Hindu

Minimum Support Price (MSP):

Overview:

  • MSP guarantees a minimum price to farmers when the government procures their produce.
  • Recommendations for MSP are made by the Commission for Agricultural Costs and Prices (CACP), considering factors like production cost, demand-supply dynamics, and market trends.
  • CACP, established in January 1965, operates under the Ministry of Agriculture and Farmers Welfare.
  • Final approval on MSP levels is given by the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister.

Objectives:

  • Ensure farmers receive remunerative prices and promote crop diversification.

Crops Covered:

  • CACP recommends MSPs for 22 crops and Fair and Remunerative Price (FRP) for sugarcane.
  • Mandated crops include 14 kharif crops, 6 rabi crops, and 2 commercial crops.

Types of Production Cost:

  • CACP estimates three production cost categories: A2, A2+FL, and C2.
  • A2 covers direct paid-out costs like seeds, fertilizers, labor, etc.
  • A2+FL includes A2 plus imputed value of unpaid family labor.
  • C2 is a comprehensive cost, factoring in rentals, interest, and more.

Considerations for MSP:

  • CACP evaluates both A2+FL and C2 costs while recommending MSP.
  • A2+FL cost is considered for returns, while C2 is used as a benchmark reference.

Ethical Imperative for Guaranteed MSP

  • Calls for legal assurance of Minimum Support Price (MSP) are driven by the need for fair farm produce pricing and self-sufficiency in food production.
  • MSP serves as a crucial tool for ensuring food security and addressing market failures in agriculture.

Constitutional and International Support

  • Various constitutional articles and the United Nations Declaration on the Rights of Peasants support the legal enforcement of MSP.
  • Opinion surveys show significant public and farmer support for the legal right to MSP.

Concerns Related to MSP in India:

  • Limited Extent:
    • Officially announced for 23 crops, but primarily benefits rice and wheat due to extensive procurement under the National Food Security Act (NFSA).
    • Implementation for other crops is ad-hoc, leaving the majority of farmers without MSP benefits.
  • Ineffective Implementation:
    • Shanta Kumar Committee’s 2015 report indicated that only 6% of MSP reaches farmers, highlighting inadequate procurement mechanisms and market access.
    • Around 94% of farmers do not benefit from MSP due to these shortcomings.
  • Skewed Crop Dominance:
    • Overemphasis on rice and wheat MSP results in a skewed cropping pattern, neglecting other crops and potentially causing ecological, economic, and nutritional imbalances.
    • Lack of alignment with market demands may limit income potential for farmers.
  • Middlemen Dependency:
    • MSP-based procurement involves intermediaries like middlemen and officials from Agricultural Produce Market Committees (APMCs).
    • Smaller farmers face challenges accessing these channels, leading to inefficiencies and reduced benefits.
  • Burden on Government:
    • Government bears a significant financial burden in procuring and maintaining buffer stocks of MSP-supported crops.
    • This diverts resources from other agricultural or rural development programs, impacting overall sectoral growth.

Way Forward for Addressing Concerns Related to MSP in India:

  • Diversification of MSP Coverage:
    • Expand MSP coverage to include a wider range of crops beyond rice and wheat, ensuring equitable support for farmers cultivating diverse crops.
  • Enhanced Procurement Mechanisms:
    • Strengthen procurement mechanisms for non-target crops, ensuring efficient and timely MSP implementation across all regions.
  • Market Integration and Access:
    • Facilitate direct procurement by farmers through the provision of market infrastructure and digital platforms, reducing dependence on intermediaries.
  • Promotion of Crop Diversity:
    • Encourage crop diversification through awareness campaigns, subsidies, and incentives, promoting sustainable farming practices and reducing ecological risks.
  • Market Linkages and Price Discovery:
    • Establish effective market linkages and price discovery mechanisms to align MSPs with market demand, enhancing farmers’ income opportunities and reducing reliance on government support.
  • Empowerment of Smallholder Farmers:
    • Provide capacity-building support and financial assistance to smallholder farmers to improve their bargaining power, enabling them to access MSP benefits more effectively.
  • Transparency and Accountability:
    • Ensure transparency in MSP operations and procurement processes, with regular audits and monitoring mechanisms to prevent leakage and corruption.
  • Policy Coordination and Integration:
    • Foster coordination between relevant ministries and stakeholders to integrate MSP policies with broader agricultural and rural development strategies for holistic and sustainable outcomes.
  • Innovative Solutions:
    • Explore innovative solutions such as contract farming, farmer producer organizations (FPOs), and value chain integration to enhance farmers’ access to markets and improve income stability.
  • Continuous Evaluation and Feedback:
    • Conduct regular evaluations of MSP policies and programs, incorporating feedback from farmers and experts to adapt and refine strategies based on evolving agricultural dynamics and challenges.

Current State of MSP and Farmers’ Demands:

  • Discrepancy Between Current MSP and Farmer Demands:
    • Government-set MSP for wheat in the Rabi Marketing Season 2024-25 is Rs 2,275 per quintal, exceeding farmers’ demand of C2 plus 50%.
    • However, MSP calculation based on A2+FL formula results in a lower price compared to C2 plus 50%.
  • CACP Recommendations and Methodology:
    • The Commission for Agricultural Costs & Prices (CACP) recommends MSP using the A2+FL formula, considering only paid-out costs and imputed family labor value.
    • Contrarily, the C2 formula incorporates additional factors such as rental value of owned land and interest on fixed capital.
  • Return over Cost of Production:
    • For wheat in Punjab, the cost of production (C2) is Rs 1,503 per quintal, while MSP is Rs 2,275 per quintal.
    • Farmers receive Rs 772 per quintal more than the cost of production, representing a return of 51.36% over C2.
    • Similarly, for paddy in Punjab, the return over C2 was 49%, and over A2+FL, it was 152%.
  • Implications:
    • Discrepancies between MSP calculation methods and farmer demands highlight the need for aligning MSP with comprehensive cost factors to ensure fair remuneration for farmers.
    • Addressing this gap is crucial to mitigate farmer distress and enhance agricultural sustainability and livelihoods.

Source:

https://epaper.thehindu.com/reader

Mains Practice Question:

Critically analyze the role of Minimum Support Price (MSP) in ensuring food security and supporting farmer incomes in India. Discuss the challenges associated with the implementation of MSP and evaluate the potential of legal guarantees for MSP as a solution.