How successful was the ‘Minimum Support Price’ (MSP) scheme to double the income of farmers?
After two successive drought incidents in 2014-15 and 2015-16, the government has set an ambitious target of doubling farmers’ income by 2022-23. Ashok Dalwai Committee has been constituted by the government to determine a strategy to achieve this goal of doubling the income of farmers by the year 2022-23.
The committee clearly stated that for doubling the real income of farmers by the year 2022-23, a growth rate of 10.4 percent per annum would be required.
It is to be known that according to an estimate made by NABARD in the year 2016-17 regarding the income of farmers, the average monthly income of farmers in the year 2015-16 was Rs.8,931.
According to an assessment survey conducted by the National Statistical Office (NSO) on the status of farming households in the year 2018-2019, an average farming household earned a monthly income of Rs 10,218 in the year 2018-19.
In such a situation, it can be said that the goal of doubling the income of farmers is very ambitious and to achieve this, it will be important to evaluate the ‘Minimum Support Price (MSP) system as an alternative policy.
The goal of the minimum support price system is-
To motivate the farmers to increase production and thereby ensure a remunerative and relatively stable price environment for the farmers by increasing the availability of food grains.
Improving access to food.
Developing a production pattern that is in line with the overall needs of the economy.
Criticism of MSP
No MSP for the allied sector: Experts believe that allied sectors like animal husbandry and fisheries contribute more to the opportunity to increase the income of farmers.
But despite this, there is no ‘Minimum Support Price’ system for products related to animal husbandry or fisheries, nor has any arrangement been made by the government for their purchase.
These products are mainly demand-driven and most of the marketing takes place outside the APMC Mandis.
Inadequate storage arrangements: It is believed that farmers’ income can be increased through continuous increases in ‘Minimum Support Price’ (MSP) and government procurement.
However, the stock of food grains with the government is already very high, which discourages the government to buy more.
MSP system leaning in favor of paddy and wheat: The ‘MSP’ system in India is heavily tilted in favor of paddy and wheat, which has led to the tendency of overproduction of these crops.
In addition, it discourages farmers from cultivating other crops and horticultural products when their demand is high and they can contribute to the increase in farmers’ income.
Economically unaffordable: The economic cost of rice procured by the Food Corporation of India comes to around Rs 37 per kg and that of wheat to around Rs 27 per kg. The market price of rice and wheat is much less compared to the economic cost of FCI.
Due to this, the financial burden of Rs 3 lakh crore is falling on the FCI.
This burden is ultimately borne by the central government and this diverts money to be invested in agricultural infrastructure.
Market-driven system in the non-farm sector: MSP system for milk and poultry does not exist and pricing is done by the company in consultation with the milk unions and not by the government.
Due to this, milk producers do not have to go through the market system where farmers often have to pay high commissions, market fees, and cess.
In addition, these cooperatives compete with multinational private companies such as Nestle and Hatsun, which ultimately contributes to increasing farmers’ income.
Along with this, private companies also invest in rural infrastructure.
With the combined effect of these factors, the milk sector is growing two to three times faster than rice, wheat, and sugarcane.
Restrictions on exports: With the surplus production of cereals, a large part of these grains are wasted every year by rotting. This is due to restrictions imposed under World Trade Organization (WTO) norms, where there is a condition that the food grains stock held with the Food Corporation of India (which is heavily subsidized due to MSP) cannot be exported.
Errors in the implementation of the MSP scheme: The Shanta Kumar Committee, constituted in the year 2015 to suggest the restructuring of the Food Corporation of India, had said in its report that only 6% of the MSP is received by the farmers, which means that the country 94% of farmers are deprived of the benefit of MSP.
way ahead
More investment in the agriculture-allied sector: It is important to invest more in animal husbandry and fisheries and fruits and vegetables which provide more nutritional value.
The best way to invest would be to encourage the private sector to build efficient value chains.
Empowering FPOs: It is also very important to protect the farmers from profit-oriented markets.
In such a situation, it is necessary to empower ‘Farmer Producer Organizations (FPOs). This will on the one hand increase the bargaining power of the farmers and on the other hand create a conducive investment climate.
Awareness should be increased among the farmers and it should be ensured that all necessary information is disseminated to the minimum level, which will strengthen the bargaining power of the farmers.
Time-bound payment to farmers: Agriculture is the basic source of livelihood for farmers and delay in payment has a negative impact on them.
The problem of delay in payment needs to be addressed and it is important to arrange for immediate payment. Prompt payment at remunerative rates is essential for the sustainability of agricultural livelihoods.
Irrigation Facility: Much of the country’s agri-GDP growth is volatile and largely depends on the monsoon. This is especially true in those states, where the level of irrigation is relatively low.
For example, the state of Punjab with about 99 percent irrigation cover has much higher income stability than Maharashtra with only 19 percent irrigation cover.
Conclusion
Agriculture is one of the foremost important sectors of the Indian economy. Increasing productivity, diversifying high-value crops, and shifting people from the agricultural sector to other high-productivity areas are more sustainable solutions.
