Why is MSP important for farmers?
At a time when I see an euphoria among mainline economists over the new set of agricultural reforms, media reports say the Commission for Agricultural Costs and Prices (CACP) has observed that only 12 per cent of the country’s paddy cultivators were able to sell their produce at the guaranteed Minimum Support Price (MSP) in the 2018-19 kharif marketing season. Imagine, if the remaining 88 per cent farmers were also able to sell paddy at the MSP the rural economy would have seen an upswing.
The uneven picture of paddy procurement is not very different from that of wheat procurement in the rabi marketing season where bulk of procurement operations is confined to Punjab, Haryana and now Madhya Pradesh. This is primarily because by and large the network of regulated markets has remained confined to the traditional Green Revolution belt of the north-western region. Against the requirement of 42,000 regulated mandis in five km radius, there exists close to 7,000 mandis only under the Agriculture Produce Market Committee (APMC) Act. Nor has the MSP price delivery been expanded to cover more regions and more crops.
This reflects a historic asymmetry in procurement operations, with a high of 95 per cent in case of paddy being procured in Punjab, and over 70 per cent in Haryana whereas the share of procurement in Uttar Pradesh (3.6 per cent), West Bengal (7.3 per cent), Bihar (1.7 per cent) and the north-eastern States have remained miniscule. With most farmers getting a distress price, farm incomes have remained very low in these States. This prompted the CACP to suggest: “Therefore, concerted efforts should be made to extend the benefits of procurement to small and marginal farmers in general and eastern and NE States in particular.”
The importance of this recommendation can be gauged from the fact that deprived of the right price; truckloads of paddy from UP (and earlier from Bihar) are being transported to be sold in Haryana where farmers at least get an assured MSP. This is not the first time when paddy and wheat from UP and bajra from Rajasthan is being brought to be sold in Haryana, which has a robust marketing infrastructure network. With procurement operations remaining restricted in most States, majority farmers have remained dependent on markets. If markets were as efficient as is being made out, and provided farmers with a higher price, the question that needs to be asked is why does agriculture continue to be in the grip of a severe agrarian crisis?
The tearing hurry with which agriculture market reforms have been pushed, without even consulting farmers for whom these laws are designed for, have seen huge farm protests continuing in Punjab and Haryana. Providing for ‘one country, one market’ by removing the inter-state and intra-state barriers in agriculture trade; making trading outside the APMC market boundaries to be free of any taxes so as to bring in competition; the government, the industry and the mainline economists claim these laws will attract private investments, and the markets will provide farmers with higher prices. Farmers can sell anywhere in the country where he can get a higher price.
Although APMC markets and the provisions of MSP have remained untouched in the new laws, agitating farmers say that the real intention is to gradually dismantle the APMC mandi network and in the process get away from the delivery of MSP to farmers. With several committees earlier pointing to MSP becoming a barrier in price discovery their fear is certainly not unfounded. Also, the APMC mandis have been blamed for monopolising trade and the licensed middlemen in the mandis accused of exploiting farmers. There is no denying that over the years APMC mandis have seen certain distortions emerging but farmers say the need is to reform the mandi structures and not to render these markets redundant in the next few years.
Leaving farmers to face the vagaries of markets has not been of help anywhere in the world. Knowing that unregulated markets will further exacerbate the farm crisis, protesting farmers are demanding a right-based security net. The demand is for another law that makes MSP a legal right for farmers. Since MSP is announced for 23 crops every year, but is effectively implemented for two crops only – wheat and paddy, where procurement takes places (also to some extent for cotton, mustard and some quantities of pulses), farmers want no trading to be allowed below the MSP.
The real freedom for farmers will be if all paddy and wheat farmers (and for that matter farmers growing other crops) throughout the country are assured of getting MSP wherever and to whosoever they sell. Even for contract farming, the price to be worked out should not be less than the MSP announced. Given that the private companies are promising to provide a higher price to farmers in any case, this should not be a problem. #
MSP Procurement: Real freedom for farmers.Deccan Herald. Nov 27, 2020