Data Focus

Are farmers benefiting from MSP?  

Radheshyam Jadhav | | Updated on: Jun 16, 2022

Producers of tur dal prefer to sell in the open market where prices are ruling at Rs 9,000 per quintal, compared to Rs 6,300 MSP  

The Minimum Support Price (MSP) for tur (pigeonpea) in 2014-15 was Rs 4,350 per quintal, which was hiked to Rs 6,300 in 2021-22. However, in Latur city, one of the biggest grain markets in Maharashtra with hundreds of dal (pulse) mills, farmers are not selling to government procurement agencies. Many prefer to sell in the open market, where the prices are ruling at Rs 9,000 per quintal, compared to Rs 6,300 MSP.  

For the 2022-23 Kharif season, the government has announced an MSP of Rs 6,600, up Rs 300 per quintal, with a return of 60 per cent on cost. However, tur producers in the Latur region are unhappy. They say the government has calculated the cost of production at Rs 4,131 per quintal, which is not based on the actual input cost incurred by farmers. Tur producer farmers hope that market prices remain high compared to the MSP even in this season.   

According to the government, an increase in MSP for Kharif crops in the Marketing Season 2022-23 is in line with fixing the MSPat least 50 per cent over the all-India weighted average Cost of Production. The return on MSP over the all-India weighted average Cost of Production is the highest for bajra (85 per cent), followed by tur (60 per cent), urad (59 per cent), sunflower (56 per cent), soyabean (53 per cent) and groundnut (51 per cent).  

How many farmers get MSP benefits?  

Even as the government claims that a hike in MSP will benefit farmers, the data tells a different story. The percentage of output sold by households under MSP ranges from 0 to 24.7 per cent (except sugarcane), according to the National Sample Survey – NSS 77th round. Data presented by the Agriculture Ministry in the Lok Sabha in August last year shows that a little over 14 per cent of land-owning farmers benefit from MSP. In 2019-20, about 2,04,63,590 farmers benefited from MSP, while in 2020-21 about 2,10,07,563 reaped the benefits of MSP.  

“The MSP and procurement support policy was designed for cereals during the Green Revolution. It is high time that the policy is revisited. MSP is discouraging farmers, especially from Punjab and Haryana, from diversifying to other crops,” said farmer leader Anil Ghanwat, who was a member of the Supreme Court-appointed Committee on Farm Laws.     

The market and the MSP  

MSP is a form of market intervention by the Centre to insure agricultural producers against a sharp fall in farm prices. The data shows that MSP and market price fluctuate constantly. Farmers say that most of the time, they have to sell their produce below MSP in the market.  

“Any product that is produced needs to be traded at a viable price. MSP is an indicative floor price to protect farmers against any undue fall in prices, especially during harvest. The government does not have the financial coffers to buy whatever is produced of all 23 commodities that are currently under the cover of MSP,” the Supreme Court Committee report mentioned.  

However, according to the Ministry of Agriculture, the overall market also responds to the declaration of MSP and the government’s procurement operations, which results in private procurement on or above the MSP for various notified crops. 

Procurement cost  

For the Food Corporation of India, the economic cost of acquiring, storing, and distributing foodgrains is about 40 per cent more than the procurement price – an addition of around Rs 1,200 per quintal for rice and Rs 800 per quintal for wheat – according to the Supreme Court-appointed Committee.  

Published on June 16, 2022
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