Can MSP Be Granted Legal Status?

With farmers once again knocking at the doorstep of the national capital with the demand to have legal status to Minimum Support Price (MSP), the focus has shifted on whether the demand is feasible or is just outrageous. And moot question is why these protests are limited to only Punjab and some areas of Western UP? Does that mean these protests coming of the eve of Lok Sabha polls, are politically motivated and farmers in other parts of the country are more well-off and don’t need the legal status to the MSP?

India, with its agrarian roots deeply embedded in its cultural and economic fabric, is currently grappling with a severe farm crisis. The agricultural sector, which employs about 67 per cent of country’s population, has been facing challenges ranging from economic distress to policy concerns.

Several factors contribute to India's farm crisis, including fragmented land holdings, dependence on monsoons, outdated farming practices, and the lack of access to modern technology. The economic disparity between urban and rural areas further exacerbates the challenges faced by farmers, pushing them into a cycle of debt and poverty.

With per capita cultivable area decreasing with every passing generation and input rising rapidly, agriculture is hardly a profitable business. Most families are clinging to the profession due to lack of necessary skillset to have an alternative profession. Their produce is hardly enough to sustain their families throughout the year. That’s why they have either been selling land to migrate to urban slums throwing themselves into being construction labourers, autorickshaw drivers or even putting up small street-side kiosks to sell things like fruits, vegetables or even pan & bidis.

That’s why the farm crisis has manifested in widespread protests by farmers, with the most prominent being the farmers' agitation that began in late 2020. Thousands of farmers, primarily from states like Punjab, Haryana, and Uttar Pradesh, converged on the borders of Delhi, demanding the repeal of the three contentious farm laws passed by the government.

The three laws aimed to liberalize the agricultural sector by enabling farmers to sell their produce directly to private buyers, bypassing the traditional Agricultural Produce Market Committees (APMCs). However, farmers feared that these laws could lead to the dismantling of the MSP system and leave them vulnerable to exploitation by corporate interests.

After over a year-long protests, the government repealed the three agri-laws forming a committee to look into their demand to provide a legal status to the MSP. “With nothing moving during past three years, we are forced to start agitation again”, said farmer leader Jagjeet Singh Dallewal.

MINIMUM SUPPORT PRICE 

MSP is a price set by the government to ensure that farmers receive a minimum remunerative price for their crops. It serves as a safety net, guaranteeing farmers a baseline income and protecting them from market fluctuations. However, the lack of a legally binding MSP and its non-uniform implementation across states have left farmers in certain regions vulnerable to price volatility.

The MS Swaminathan Commission proposed that the government should raise the MSP to at least 50% more than the weighted average cost of production (known as the C2+ 50% formula). This formula includes the imputed cost of capital and rent on the land to ensure farmers receive a 50% return.

CURRENT MSP MECHANISM

The central government announces MSP based on recommendations from the Commission for Agricultural Costs and Prices (CACP). The CACP considers various factors, including overall demand-supply conditions, production costs, domestic and international prices, intercrop price parity, and economic impact.

HURDLES IN LEGALIZING MSP

Infrastructure Challenges: Implementing legal status for MSP requires physical resources to store large quantities of produce. When there are no buyers willing to pay the MSP, the government must procure the crops.

The government may lack the necessary resources to handle such large-scale procurement. Ensuring storage facilities and managing procurement would be a significant concern. Legalizing MSP would require greater accountability and transparency in the procurement process.

Moreover, in case of sudden glut in production of a perishable commodity like vegetables, the government won’t be in a position to buy the entire produce. However, farmer leaders don’t agree. Says Dr Ashish Mittal, “the government doesn’t need to procure anything. Once MSP is legalised throughout the country, government needs to facilitate setting up storage and processing facilities at district level – just like government opening medical colleges at district level”.

WHY PUNJAB-CENTRIC PROTESTS

There are people who question these protests for being only Punjab-centric. In fact, such questions were raised during last protests as well. Protestors were branded with various slurs like Khalistani and anti-nationals. However, the reason lies elsewhere.

Agriculturist and Food Issues expert Devinder Sharma says, Punjab's per hectare production is at least one and a half times of that in other states. Thats why any fluctuation in prices and MSP deviations affect them the most. If Punjab farmers are as well off as the government portrays them to be, why is there exodus of farmers from Punjab to the West, mostly as illegal immigrants.   

ALTERNATIVE SOLUTIONS

Providing income support directly to farmers might be more feasible than enforcing MSP through legislation. Another approach is a nationwide scheme of price deficiency payments, where the government compensates farmers when market prices fall below the MSP. This could incentivize states to follow suit.

While a legal guarantee for MSP could democratize benefits and enhance accountability, it also presents practical challenges. Policymakers need to carefully weigh these factors to ensure sustainable support for farmers.

COMPREHENSIVE AGRARIAN REFORMS

While the government has engaged in dialogue with farmers and made some concessions, the underlying issues remain unresolved. Addressing the farm crisis requires a holistic approach, encompassing agrarian reforms, investment in rural infrastructure, promotion of sustainable farming practices, and the establishment of a robust MSP mechanism.

As India navigates through these challenges, finding common ground between farmers and policymakers is essential to pave the way for a more inclusive and prosperous agrarian future.