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The MSP is a price which the government guarantees that a farmer will get for his or her crop, if they are unable to get a higher market rate. For example, if the price of a quintal of wheat is 1,300 in the market but the MSP is Rs 1,500, the government guarantees that the farmer will get at least Rs. 1,500 per quintal.
Farming in India is facing a major crisis because costs of cultivation have increased over time while crop prices have not increased as much. In addition, farmers have faced a series of very major problems over 10 year, including droughts, the effects of demonetization and the GST rollout, the impact of lockdowns and stagnant rural demand.
Agriculture is already a very high-risk economic activity, because it has three kinds of risk. Farmers don’t know which crop to pick, and how much they will get after harvest. They don’t know how much crop will grow, because of weather, pests, etc. They don’t know how much it will cost, because of changes in prices and availability of inputs and difficulty to get loans.
Volatile crop prices are perhaps the biggest risk. Most Indian farmers are smallholders, with around 85% having less than 3 acres of land. They can neither store their harvest for long, or transport it very far. They usually have high-interest loans which need immediate payment. When all the crops reach market in harvest season, prices fall – and small farmers have no choice but to sell their price very low.
When farmers have higher costs of cultivation than the prices they get, they incur losses. This means that farming is no longer financially viable for hundreds of millions of farmers. This is obviously bad for the farming community, but also for the country, since around 60% of Indians still depend on farming for their livelihood.
MSP provides small-scale farmers, who often struggle with limited resources, a safety net against market uncertainties. By ensuring a guaranteed minimum income, it empowers them to sustain their livelihoods and contributes to rural economic stability. By offering a stable pricing mechanism, it shields farmers from abrupt changes in market conditions – in India and the world – that might adversely affect crop prices.
Using the MSP, the government can incentivise the cultivation of certain crops, such as food grains, which are essential for food security. An MSP which covers a wide range of crops can also be used to encourage crop diversity and a shift to more sustainable and nutritious crops, such as traditional staples like millets; and those that India currently has to import, such as pulses and edible oilseeds.
The current system of public crop purchase is really designed to purchase basic food grains (rice and wheat) for the public food distribution system, to give food security under the National Food Security Act. It is oriented to providing cheap food for consumers, especially in urban areas. The current system does not do enough to ensure that farmers receive a remunerative price for their crops, because the MSP is often set too low or the procurement of the crops does not take place.
No, not at all. Procurement is only one way to ensure that prices are stable. Congress’ legal MSP guarantee will use different methods to ensure that farmers receive MSP, namely:
Our scheme coherently brings together tactics which have already been tried by various Governments.
Depending on the exact prices, experts have estimated an outlay of between 50,000 crores to 2 lakh crores. This is just 1-4% of the Union budget today.
In addition, a stable MSP will reduce the financial burden on banks and taxpayers due to non-payment of loans, which need loan waivers. This would reduce another major concern currently plaguing Indian agriculture and the economy.
The Swaminathan Commission was a committee headed by Dr MS Swaminathan, the famous agricultural scientist, to investigate how to strenghten Indian farmers. It had recommended an MSP of 50% over the costs of cultivatio to provide a reasonable income for farmers. It is difficult to measure costs, but the Commission defined several measures, which variously include input costs, costs of capital and rental income of land.
Your guess is as good as ours! Remember that PM Modi has repeatedly already promised farmers MSP – when he was Gurajat CM, when he was PM, and also to the farmers when they called off their agitation two years ago. Since “Modi ki guarantee” is being broadcast across poster, radio and TV, it is worth asking what the value of such a guarantee is, given this record of failed promises.
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