Form of words:
New Delhi: Even after Prime Minister Narendra Modi promised to repeal three controversial agriculture laws, protesting farmers are refusing to return home.
They passed Now written record To the Prime Minister, saying he would continue his protest for other demands, chief among them the legal guarantee of Minimum Support Price (MSP).
MSP is the minimum price safety net provided by the government to the farmers. It is through MSP that the government procures the produce of the farmers to give them an assured purchase market as well as a guaranteed price.
So far, on the recommendation of the Central Government, Commission for Agricultural Costs and Prices (CACP)Paddy, Wheat, Maize, Jowar, Bajra, Barley, Ragi, Gram, Arhar, Moong, Urad, Lentil, Groundnut, Rapeseed-Mustard, Soyabean, Sesame, Sunflower, Safflower, Niger Seed, Copra – MSP declared for 23 crops Sugarcane , cotton and raw jute.
Without a legal mandate, the government is not bound to procure 23 crops Minimum Support Price
In its current form, the MSP-based procurement system aims to protect farmers from price volatility scenarios, such as market surpluses due to bumper crops, climate uncertainty, lack of information for crop production prices, etc.
How can the government give a legal guarantee for MSP?
Primarily, there are two ways in which the government can provide legal guarantees for MSPs, Both with dire economic consequences.
First, the government may declare the MSP as the baseline price for 23 crops in the market. It will be mandatory for private companies to pay MSP rates. Which can lead to increase in price.
Secondly, the government itself can buy all 23 crops at MSP. At present, several government agencies like the Food Corporation of India (FCI), National Agricultural Cooperative Marketing Federation of India (NAFED) and the Cotton Corporation of India (CCI) supply large quantities of wheat, paddy or rice, pulses and cotton price support at MSP from farmers. To provide, especially in case of a fill when the market prices fall below the MSP.
How does this affect government agencies?
Government agencies, at their best, are still able to procure only 30 to 40 per cent of the total production of a crop at MSP. And they have to achieve this with skyrocketing carry-forward stock as well as rising buying, handling, warehousing and other miscellaneous charges.
For example, in the 2019-20 season, FCI procured 77.34 million tonnes (MT) of paddy and 38.99 MT of wheat, costing around Rs 2,15,894 crore at MSP. This increased to Rs 2,53,274 crore in 2020-21.
While the entire procurement in terms of handling, storage and distribution of these food grains exceeds Rs 20 per kg, which is the MSP of these crops (Wheat: Rs 20.15 per kg; Paddy: Rs 19.60 per kg), the stock purchased is distributed goes. At extremely subsidized rate of Rs 2-3 per kg to the poorest section of the society under PDS and other such schemes.
Farmer leader Anil Ghanwat, a member of the Supreme Court-appointed panel to study agricultural laws, told ThePrint that making MSP a legal guarantee would cost a lot.
“The demand to legally guarantee MSP for 23 crops will drive the country to bankruptcy as the Center or the state, whoever buys and pays the crops at MSP, will go bankrupt,” he said. “All the revenue will be diverted to this and the government will be left with no money to develop and maintain essential things like roads, bridges etc.”
“If MSP is legalized for 23 crops, soon other farmers will also come with their demand for their crops like fruits and vegetables,” he said.
“Due to the current MSP regime, the government procures 110 lakh tonnes of wheat and paddy even though it has the buffer stock norm of just 41 lakh tonnes. The rate of purchase and stock is also increasing in case of all other crops between 23 MSP,
What are the other issues with the MSP guarantee?
Another major problem with MSP as a legal guarantee is that it can complicate the government’s efforts to ensure the storage of the purchased crop.
The stock of food grains procured at MSP in the central pool – such as wheat and rice – often exceeds the minimum buffer stock norms by more than double. As per the buffer stock norms, in October this year, store The central pool should have been 257.70 lakh tonnes but it was 721.78 lakh tonnes.
The same is true for all other crops out of 23 eligible for MSP. For example, in the five-year period between 2014 and 2019, NAFED procured 91 lakh tonnes of oilseeds and pulses at MSP, an increase of 1205 per cent compared to 7.02 lakh tonnes procured between 2009 and 2014.
With the increase in food grains production and cost of procurement at MSP on the one hand and handling (storage, packing and distribution) on the other, the burden of bills with the government has increased.
Further, as per the first method, if the government decides to fix the MSP as the baseline price for those 23 crops, it will push the retail and wholesale prices to a higher level, in isolation. This From the market equation of demand and supply, which causes inconvenience to the consumers.
This is also likely to hurt the agriculture export sector in the country, which has been one of the rare silver linings of the economy during the Covid-19 pandemic.
of India in 2020-21 agricultural exports increased At a record high of six years. This increase in exports was riding on India’s availability of food grains at a lower rate in the market than other exporting countries. Most of the exported food grains were supplied from major producing states like UP, Bihar, West Bengal, Gujarat and Rajasthan.
While these states are major producers of wheat and rice, the procurement by the government at the MSP has remained minimal with farmers selling their produce at market prices making it viable for export.
Explaining the weaknesses of the MSP regime, Economist Ila Patnaik, Professor, National Institute of Public Finance and Policy, said, “In any system where prices are fixed by the central planner, it leads to mis-allocation of resources. Then Prices are not determined by what people want and are willing to pay for it.The market is good at fixing the price of goods as it reflects the demands of the people.
He said that in case of MSP, apart from production prices, various input costs like electricity, water, fertilizers are already being fixed by the government.
“This leads to poor allocation of resources in the economy. This leads to a stockpile of food you don’t need and need instead,” she said. “For example, if you allocate more resources to wheat, team Not enough resources are available and its prices go up. Demand changes as people’s income changes but central planners will be able to shift prices accordingly.
Read also: Flat prices, late payments, rising costs – why western UP’s sugarcane farmers are in trouble
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