Why MSP is central to farmers’ issue

What's the future of farm reforms?

The farmers’ agitation, which went on for over a year and cost the nation more than 700 lives, has ended. But not many in New Delhi have cared to judge the pulse of the farmers. One of three controversial laws, on which the agitation continued for so long, concerns the central question of minimum support price (MSP). To understand this, one must go back more than half a century in Indian agriculture.

It is important to note in this context that the principle of MSP was put in place by New Delhi in 1966-67 to ensure that dwarf wheat varieties imported from the International Centre For Maize and Wheat Research (CIMMYT), Mexico, and crossed with the native ones, was widely cultivated by Indian farmers. Hence, the crop was only wheat, to start with, and the MSP fixed was Rs 54/quintal (100kg). Later, this principle was extended to rice, where dwarf varieties imported from the International Rice Research Institute, in the Philippines were crossed with the native ones and farmers were coerced to cultivate them. This was the beginning of the green revolution campaign in India.

The Price Support Policy of the government is directed at providing insurance to agricultural producers against any sharp fall in farm prices. The minimum guaranteed prices are fixed to set a floor below which market prices cannot fall. Until the mid-1970s, the government (Commission for Agricultural Costs and Prices, CACP- an apex body for pricing policy under the Ministry of Agriculture, Government of India) announced two types of administered prices: Minimum Support Prices (MSP) and Procurement Prices (PP).

The MSPs served as the floor prices and were fixed by the government in the nature of a long-term guarantee for investment decisions of 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. Procurement prices were the prices of kharif and rabi cereals at which the grain was to be domestically procured by public agencies (like the FCI) for release through PDS. It was announced soon after harvest began. However, these provisions were not strictly adhered to by the government as we shall see below.

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Situation on the ground:

The farmers are worried that the new legislation may eliminate the minimum support price (MSP) on their yield.

A Union government committee report states that only 6 per cent of the country’s farmers take advantage of MSP. Punjab and Haryana farmers only benefit from the MSP provision. A 2016 Niti Aayog report states that 100 per cent of farmers in Punjab sell their crops at MSP, no data are available for Haryana.

Despite the promise of the PM and Minister of Agriculture about the continuance of the MSP regime, the following questions linger:

How many farmers benefit from MSP every year?

The government has no data on this. Under the PM Kisan Yojana, 14.5 crore farmer families get Rs 6,000 every year. This shows that there are at least 14.5 crore farmer families in the country. But, how many farmers get MSP benefit?

On September 18, the Minister of State for Food and Public Distribution told Rajya Sabha that as of September 9, there were 43.33 lakh farmers taking advantage of MSP on wheat during the rabi season.

Of these, 10.49 lakh were from Punjab, and 7.80 lakh were from Haryana. That is, more than 42 per cent of the farmers were from Punjab and Haryana.

The number of farmers selling paddy on MSP in the kharif season was 1.24 crore. Of these, there were 11.25 lakh farmers from Punjab and 18.91 lakh farmers from Haryana. More than 25 per cent of the farmers were from Punjab and Haryana. No data is available from Telangana, the current ‘Rice Bowl’ of India.

According to the government, the number of farmers selling paddy crops at MSP in the kharif season increased by 70 per cent in 2019 compared to 2015. Similarly, the number of farmers taking advantage of MSP on wheat during the rabi season also increased by 112 per cent in 2020 compared to 2016. The procurement has not yet started for the kharif season 2021.

But the government does not buy even half of the yield every year. Statistics show that the government did not buy even half of the wheat and paddy yield in the last five years.

According to the Food Corporation of India (FCI), in 2015, 1.044 lakh tonnes of paddy were produced, of which 342 lakh tonnes, i.e., 33 per cent, were purchased by the government. Similarly, in 2019-20, paddy yield was 1,179 lakh tonnes, of which the government purchased 510 lakh tonnes, i.e., 43 per cent.

Along with this, 923 lakh tonnes of wheat were produced in 2015, out of which the government purchased 230 lakh tonnes, i.e., 25 per cent. Whereas, 1,072 lakh tonnes of wheat was produced in 2019, of which 390 lakh tonnes, i.e. 36 per cent of the wheat was purchased by the government.

The above data clearly show that there is a clear disconnect between what the government professes and what it practices.

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What should now be done?

Indian soils, in particular in Punjab, are degraded due to the environmental hazard of the chemical-centric green revolution. The carbon levels, the most important index of soil fertility, have steeply declined. The only route by which this could be corrected is to introduce soil-enriching legumes like beans. But the stranglehold of the wheat-paddy rotation comes in the way because of the MSP lever. The key to crop diversification is the MSP, in other words, ensuring that MSP provision is extended to all crops. This has been succinctly put forth by a Punjabi farmer during this author’s field trip to the state, when he said, “Why would I spend Rs 3 lakh on a borewell and deplete groundwater further from my fields if I can be assured of MSP for other crops?”

Will New Delhi listen?

(The writer is ex-prof, National Science Foundation, The Royal Society, Belgium)