A measured step

| Updated on January 24, 2018

The Centre has done well to keep the increases in minimum support prices moderate. It should now move on opening up agricultural markets

Sound economics seldom makes for saleable politics. So the Centre needs to be congratulated on keeping the increases in minimum support prices — the minimum price at which it guarantees it will procure grain from farmers — for foodgrains relatively modest, despite the political pressure to do something dramatic in order to offset some of the anti-government sentiment engendered among farmers by its proposed Land Acquisition Bill. With the prospects of a deficient monsoon looming as well, it would have been tempting to step up MSPs as a political gesture. However, the Centre has displayed maturity in sticking to the path of moderate increases in MSPs, and not straying too far from the increases suggested by the Commission for Agricultural Costs and Prices. With MSP increases for pulses — of which India is the world’s largest consumer and importer — boosted by a ₹200 per quintal one-time ‘bonus’, there is hope that this will incentivise their greater sowing and moderate the expected surge in prices due to deficient rains.

The reality is that MSP has been used more as a political tool by successive governments than a measure to alleviate agrarian distress. Nearly 80 per cent of procurement — which is where the declared MSP translates into money in the hands of farmers — happens in five agricultural surplus States, which in any case are almost independent of the monsoon cycle since they bank on irrigation. Farmer suicides or severe rural indebtedness are also virtually absent in these States. The small, marginal and subsistence farmers, who account for 67 per cent of all farmers, have been barely touched by the MSP programme. A survey of agricultural households last year (NSS 70th round) revealed that in almost all crops other than sugarcane, a majority of farmers were not even aware of the MSP for their crop. In the case of paddy, for instance, only 32 per cent of farmers were aware of the MSP, and only 25 per cent knew which government agency actually did the procuring. Also, only 17 per cent of the total crop was sold to government procurement agencies.

The regime of administering the MSP needs a radical makeover. Even the Centre has realised this since it has decided to put in place a “credible buying programme” along with the higher MSP for pulses. This needs to be extended to all crops, so that genuine distress is addressed. Further, with the reality of a bulk of the crop produced by small farmers actually being sold off to local traders and middlemen — often at distress prices — there is an urgent need to reform agricultural markets to ensure greater access to genuine buyers, and more transparent dissemination of price and demand information. This will have the dual benefit of ensuring higher farm gate prices, while at the same time moderating prices at the end consumer level.

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Published on June 18, 2015
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