Guaranteed MSP is an ethical imperative

The perennial issue of fair pricing of farm produce reigns supreme, now coupled with calls for legal assurances of Minimum Support Price. File
| Photo Credit: PTI

As the general elections draw closer, agrarian concerns have once again taken centre stage. Farmers from the heartland of the Green Revolution have travelled to the border of the capital to not only voice their distress, but also to shape the electoral discourse. The ruling dispensation, sensing adverse electoral implications, attempted to reach out to the farmers. It said it was ready to procure pulses, maize, and cotton at MSP, but this was contingent upon farmers guaranteeing crop diversification. However, these efforts were rejected as the core issues were not addressed, say farm leaders.

The perennial issue of fair pricing of farm produce reigns supreme, now coupled with calls for legal assurances of Minimum Support Price (MSP). However, beyond mere legal mandates lies the pressing concern of maintaining self-sufficiency in food production and addressing the ongoing challenge of distribution. This underscores the ethical imperative of anchoring a legal guarantee for MSP.

The MSP regime was a vital instrument for ensuring food security in India. Given the unique nature of agriculture, farmers lack the ability to exert significant influence, let alone determine the price of their produce. This constitutes a ‘market failure.’ Thus, MSP ensures that agricultural commodity prices remain above a predetermined benchmark to facilitate remunerative price discovery.

Produce and perish trap

The MSP is announced annually for 23 crops covering both the kharif and rabi seasons, well in advance of sowing, with 21 of them being food crops. However, despite the announcements, the implementation of MSP remains poor. Only 6% of farmers, primarily those cultivating paddy and wheat in States such as Punjab, benefit from MSP. Most transactions involving these essential food commodities occur below the MSP, rendering farming economically unviable for the majority of producers in India. As a result, farmers are trapped in a dangerous cycle of produce and perish, leading to crippling debt and deaths by suicide. All these emphasise the pressing need to ensure MSP, including the one recommended by the eminent agricultural scientist M.S. Swaminathan (with a 50% profit margin).

Several articles under the Constitution, as well as the United Nations Declaration on the Rights of Peasants, support the legal recourse to guaranteeing MSP. According to a recent opinion survey by an English TV channel, 83% of landowners and 77% of farm labourers expressed solidarity with the agitating farmers. Notably, 64% of the public also endorsed the farmers’ demand for a legal right to MSP.

Sugarcane growers already benefit from a ‘statutory’ MSP, which sugar factories strictly adhere to when purchasing cane from farmers. A few years ago, Maharashtra attempted to amend its Agricultural Produce Market Committee (APMC) Act to prevent the purchase of agricultural produce below MSP, but the effort failed due to a lack of political will and a comprehensive strategy. The Karnataka Agricultural Price Commission has laid out a clear roadmap, including potential financial commitments, to ensure a legally binding MSP for crops cultivated in the State. A private member bill on The Farmers’ Right to Guaranteed Remunerative MSP for Agricultural Commodities was tabled in Parliament in 2018. The Andhra Pradesh government unveiled a draft bill last year aimed at guaranteeing MSP for crops grown in the State. These efforts show that the objective of establishing a legal recourse to MSP has not emerged suddenly, nor is it impossible to attain.

The solution

A minor amendment to respective State APMC Acts or the Centre’s Essential Commodities Act would suffice to introduce a law ensuring that no transactions of farmers’ produce occur at prices below the MSP. The budget outlay will not be as large as projected if legal recourse to MSP is accompanied by essential backward and forward linkages. Crop planning, market intelligence (including price forecasts), and other pre-sowing measures, along with the establishment of post-harvest infrastructure for efficient storage, transportation, and processing of farm commodities, greatly assist in managing the post-harvest glut in the market. Therefore, a legal route to MSP, complemented by the development of such linkages, would provide protection against “market failures” in addressing the surplus, rather than leading to “market distortion,” as claimed by some mainstream economists.

Even enhancing MSP to provide a 50% profit margin over total cost is not challenging, considering that current margins already stand at around 22%. Finally, effective procurement and distribution, as envisaged under the National Food Security Act, 2013, is the most appropriate means to not only ensure MSP but also address hunger and malnutrition.

The PM-AASHA comprises schemes for price support and price deficiency payment, along with incentives to private traders to ensure MSP. While it possessed all the necessary elements as precursors to guarantee the MSP, its side-lining in policy circles highlights how political expediency rules the roost.

At present, farmers hardly get 30% of the price paid by the consumers; this will increase if MSP is guaranteed. Establishing a legally binding MSP will anger intermediaries as their share will get reduced. Often, government intervention, and particularly a legally binding MSP, is deemed a problem. It is this adherence to free market dogma that is preventing a just solution to the ongoing crisis in farmer incomes.

T.N. Prakash Kammardi is an agricultural economist and former chairman, Karnataka Agricultural Prices Commission, Government of Karnataka