MSP Conundrum: India’s Minimum Support Price Policy Benefits, Flaws & the Way Forward

 

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The MSP and its history are not very new to us as it has been happening in India from a very long time, there are accounts of history where kings might have devised a similar concept of securing the “anna daata” of their time, none the less we never cared about the medieval history for that matter and have always retorted to modern history or pre-independence history and that is where we exactly find the PDS and MSP linked to our present condition.

                During World War II, India faced acute food shortages, and to meet the exigencies, a separate Food Department was established in 1942 under the Commerce member of the Governor General’s Council. Later on, the department went through a phase of metamorphosis from the department of food to ministry of food 1947 which ultimately is now named as the Department Of Food And Public Distribution, having travelled a long way and a rough phase during its changing years the bureaucratic machinery learned a lot and came up with various solutions, one such solution was the MSP which was introduced on the recommendations of the Commission For Agricultural Cost And Prices (CACP est. 1965)which as of today recommends MSP for 23 commodities.

What is MSP?

                Now, let us get to know what the MSP is. During the green revolution, there was a huge wave of crops, due to which the prices of the commodities fell instantly, which disturbed the delicate equilibrium of the market. The demand-supply ratio was gravely disturbed; we had surplus yield and fewer/no buyers. The farmers were forced to chose the hard path of either destroying their farm produces, selling them to lower-cost or end their lives to save themselves from the harassment of the money lenders, this is when the price support policy of the govt was introduced that aimed at providing a sort-of insurance/relief to agriculture produces against any sharp fall in farm prices, the minimum guaranteed prices are fixed to set a floor below which market price cannot fall. Till the 1970’s government produced Minimum Support Price and procurement prices, out of which the MSP served as the floor prices and were fixed by the Government as a long-term guarantee for investment decisions of the producers. With the assurance that prices of their commodities would not be allowed to fall below the level fixed by the Government, even in the case of a bumper crop.

Note: The MSP is not an obligation on the government. I.e., if someday the government decides to stop the MSP, then it can, as there is no law/legislation that compels the government to issue an MSP.

Is this still relevant?

The topic has been into a long debate as there has been a lot of brainstorming involved in making the scheme, and since many factors are considered before arriving at a number which could be a potential MSP it seems like the scheme is all benefitting but we all know that nothing is perfect and hence there are nuances to this as well and these nuances will in future turn out to be a loophole which could be exploited by many wealthy farmers, let's have a look into some of there loopholes/ pro and cons of the arrangement.

Pro

·         Out of many benefactors, the MSP has been remembered to provide a safety valve to all the farmers in case there is a huge surplus; in such a case, their prices are secured by this concept.

·         By selecting and identifying a few crops and enlisting them into essential commodities, the govt had made sure that a huge sizeable population (mainly the rucks living under a power line) gets a regular supply of these commodities under the Public Distribution System and now under the Direct Benefit Public Distribution System.

·         With increasing population, the concept of MSP and procurement price has ensured that there is always some amount stock available with the Indian govt to feed the needy living in a miserable condition, also this scheme gave confidence to the govt so that they could introduce a Food Security Bill in 2013 believing that there would be no deficit of essential commodities in CWC (Central And State Warehouses).

·         Indirectly, the prices of commodities are being controlled by the government. When the government fixes the price of a crop in a season/cycle, it tends to set a benchmark that works as a price control valve. So indirectly, MSP controls the market price and makes the market a safe place for the Indian farmer.

Cons

·         This scheme or concept can be accused of killing the diverse and nutritious diet of this nation, as the govt gave subsidies and MSP on selected crops the farmers were forced to select these crops to get the security it offers, instead, generic insurance could have been introduced so every farmer could be saved from the adverse risks of the market which would eventually save the diverse diet we have always been following (in her book the famous health writer Rutuja Diwaker explains the kind of diverse diet we have had in the past).

·         Many states lost indigenous and many more fibre and nutrition-rich crops like wild barley, which can be grown with less water and give a higher yield than any other crop; many such cops were destroyed completely during a course of time.

·         The cascading effect of these crops being destroyed due to MSP is being borne by us now, right from the green revolution and introduction of MSP we have lost the track of many good crops, as a result, we are now a huge population with a major chunk of this population with various chronic illness viz diabetics, thyroid, hypertension, and other problems.

·         First, due to the introduction of pesticides and fertilizers, the crops got poisoned, and there is a huge cancer belt formed in the area of Punjab. There is a train which is popularly known “cancer special”  as a huge number of cancer patients from Punjab travel in it.

·         Apart from the use of pesticides and fertilizers, the introduction of MSP made things worse, as everyone wanted to get the maximum benefit out of the scheme, people abandoned growing what they were good at and started to grow crops in the hope that they would benefit from these lucrative MSPs.

·         Big farmers, on the other hand, started to build cartels to exploit the MSP situation, they get hold of the big warehouses and forced the small farmers who have no means to stock their farm produce to sell this produce at low rates to them, hence owning a large chunk of the produce, as a result, the govt has no other choice than to buy the goods from these large farmers, as a consequence, the rich becomes richer and the poor were crushed under the debt of money lenders, the condition for the poor farmer never actually changed even after the introduction of MSP.

Moves to improve the situation

The contentious farm bills introduced are focusing on them indirectly, as govt has planned double farmers’ income in few years, by doing so  MSP in a few years would become redundant and slowly the concept would die a natural death, dough the bills are not going to be enough (as discussed in my previous article) but they seem to give a solution to repair the health and wealth of this nation when MSP becomes a redundant concept, these farmers may go back to growing the diverse crops like barley (GOI has declared 2021 year as a barley year to popularise this dying breed).

Doubling farmers’ income is a one-stop solution to many problems. In this light, there must be a few steps taken by the GOI to double farmers' income, but not by introducing notorious bills, such as the current farm bills.

·         Govts can create large warehouses and storage granaries which will help the small farmers in terms of storage and transportation of their crop produce to create a level playing field for all of the farmers despite the scale in which they produce or make provisions so that farmers can form a small cooperative house and ask these houses to build a collective storage house through a regularise scheme.

·         We need to bring forth govt institutes which teach both traditional and modern techniques of farming so that the new generation of farmers can gain the required skill set which can, in turn, enable them to double their income more easily, till date none of our farmers are skilled enough to combine or know about the pro and con of any new technology and in many cases they don’t even know how to use these technological advancements in their favour, hence education camps and workshops are necessary.