Agri Politics Op-ed

No confidence over MSP hike ! | Editorial | The Agraria

The Union Government rushes to fulfill its poll promise of providing farmers with 50 percent more prices than the cost of production in its fourth year. The recent announcement of hike in Minimum Support Price (MSP) for paddy by Rs.200 per quintal aligns with this year’s Budget announcement, that insisted hike in MSP to achieve the dream of doubling farmers’ income. MSP is the price policy intervention by Government to ensure remunerative prices to producers and at the same time safeguarding the consumer’s interest by making food supplies at reasonable prices.

While ruling party claims the hike as ‘historic increase’, opposition and few farmers organisations claims it as an ‘eyewash’. With the present procurement infrastructure and farmer’s ignorance, MSP hike fails to take on confidence of farmers neither improving their income nor production level. Here’s why..?

Small and marginal farmers who account for 80 percent of total farm households are left with minimum or no marketable surplus. This means they are left with no produce to sell it to Government procurement agency or Markets to gain the benefits of MSP.  Hence, MSP involves only small share of producers. Further only half of the farmers are aware of MSP for rice and wheat in Gujarat, Maharashtra, Andhra pradesh and Jharkhand as reported in Economic Survey 2015-17.

Price supported procurement operates effectively only for wheat, rice and cotton crops that too in few states. The states of Punjab, Haryana, Madhya pradesh, Uttar pradesh accounts for 100 percentage of total procurement of wheat in 2016-17 and 69 percentage of total procurement of rice in 2015-16. Thus hike in MSP is not going to improve conditions of vulnerable dryland farmers, Northeast farmers and farmers cultivating crops other than paddy and wheat. Without procurement mechanism, hike for majority of crops is only notional. 

Not all farmers selling to procurement agencies get prices at MSP. Shanta Kumar committee reported that only 6 percentage of farmers are able to sell their produce at MSP. Among those households which sold paddy at procurement agencies, only 27 percentage of their sales were made at MSP.

Also the MSP hike by present government is not akin to recommendations of Swaminathan commission by excluding land costs in calculation of MSP. The Bharatiya Kisan Union leader claims that if MSP has been announced as per commission’s recommendations, then the current increase would be Rs. 700 per quintal for paddy as against announced Rs. 200 per quintal. Centre also curtailed state level bonus payments in addition to MSP announced by centre in 2014. This also prevented usual 5 – 10 percentage increase to the MSP. So, there is a huge difference between the aspiration and reality, thanks to complicated MSP calculations.

The hike in MSP is more a populist move with an eye on upcoming Lok Sabha election and assembly elections in Rajasthan and Madhya Pradesh. In 2008-09, the UPA government also announced 20.8% year on year hike in MSP for paddy. This makes scientific calculation and economic consideration of MSP fixation is under question.

The continuance of use of MSP hike as carrot for electoral gains has to be ended. The MSP has to be restructured with recent three option recommendation of NITI Aayog – market assurance scheme, price-deficiency procurement scheme and  private procurement and stockist scheme. At least procurement bottlenecks and farmers’ awareness should be looked into as an immediate response.

(This article was originally published as ‘Letter from the Editor‘ in ‘The Agraria’ e-Magazine. You can Subscribe it here)