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A seemingly fortunate event not so unfortunate really!

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By: Muneer Shamee

Minimum Support Price (MSP) described as a game changer which Government of India announced for certain crops on the basis of recommendation of the Commission for Agricultural Costs and Prices (CACP) was assumed to be a fortunate development while the party in power and position went on to impart the opposed GST, FDI and Demonetization. The opposition however demanded the rollback of MSP sighting certain lacunas in it.

In this Amendment, government has allowed the hoarding of essential commodities which was earlier banned and there was control on the prices of essential commodities and less inflation. The question still arises why the NDA government passed the Amendment Bill during Corona pandemic as there was no emergency for such a development. Moreover the bill seeks to remove commodities like cereals, pulses, oilseeds, edible oil, onion and potatoes from the list of essential commodities while the farmer, due to financial constraints, doesn’t have any ability to store the essential commodities as allowed in the new MSP.

MSP is an important Indian agricultural policy which helps to incentivize farming and ensures adequate food grains production in the country. Since the implementation of Farm Bill 2020, there has been the fear of farmers losing their support price. Indian agriculture is mainly dependent on nature. Our farmer’s face many hurdles in order to grow agricultural products including uneven rainfall, floods, droughts, snowfall and farmers loan. Whenever the famers achieve surplus crops, they get minimum benefits leading them see the produced rotting for the want of good price as well as distribution market. In such a scenario MSP at which government buys food grains from farmers as per recommendations of the CACP which is less than market price and greater than procurement price of commodity. Moreover, if the farmer gets more price than the MSP they can sell with their utmost profit.

There are various ways of determining the MSP. First of all CACP visits to different states for the spot assessment of food grains which are ultimately sent to government for implementation by Cabinet Committee on Cabinet Affairs (CCEA). Food Corporation of India (FCI) buys it and stores for future use. Central Government of India fixes MSP’s of 25 essential commodities which comprises 7 cereals ( paddy, wheat, maize, sorghum, pearl millet, barley and ragi), 5 pulses ( grain, tur, moong, urad, lentil), 8 oilseeds ( groundnut, rapeseed, mustard, soyabean, seasmum, sunflower, safflower, Tori’s, nigerseed) and 5 commercial crops ( copra, sugarcane, cotton, raw jute and vfc tobacco).

The economy of country depends on demand and supply of any product. When the supply of commodity increases, the price slashes down and when the supply is less than the requirement the prices soars up. Procurement price will be announced after the harvest higher than the MSP, but lower than the market price. Sufficient renumerations to the farmers, providing food grains actually supports the food security programme. In the hour of crisis like flood, drought, war or any other catastrophe these food grains help in procurement of necessary food items.

The second objective of MSP is to support Public Distribution System for public welfare and preserve agricultural goods. This enables the farmers to sell the goods at MSP. If there is uncertainty in the agricultural production it helps in increasing production of commodities in specific requirements. The CACP takes into account production, trends in market prices, demands and supply of required goods, international price situation and in comparison between the paid prices received by farmers which helps in implications for subsidy, to improve the agricultural products, it’s production, distribution and procurement of essential crops. From 2009 to 2013 there has been 19.3 % increase in MSP but from 2014 to 2017 it reduced to 3.6% .

However, this policy draws its criticism from the fact that there has been dearth of FCI stores and lack of markets for poor farmer’s which restricts them to sell their crops. The MSP centres are far away from villages and it becomes difficult for the farmers to reach to these centres. Also, as said earlier, the MSP is less than market price and greater than procurement price of commodity which many see as a loss in real sense.  In the Mandi the middleman used to buy these crops at a lower rate and sell them at higher rate. Several times farmers failed to get their price at MSP causing increase in farmer’s protests and agitations.

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