Beyond MSP

The Centre, while announcing the minimum support prices for the oncoming rabi season, has stuck to its policy of announcing moderate increases in the case of cereals, while promoting a shift towards pulses and oilseeds. MSP increases have moderated after 2013, after double-digit spurts that were the norm in the preceding four years. Hence, the rise in the case of wheat amounts to 6.4 per cent or ₹110 a quintal to ₹1,735, against a rise of ₹100 a quintal last year, while the increase with respect to gram (chana) is 10 per cent, or by ₹400 a quintal to ₹4,400; in the case of safflower, the hike is 10.8 per cent or ₹400 a quintal on last year’s MSP of ₹3,700 a quintal. This consistent emphasis on pulses has translated into improvements in acreage and output. MSP for most categories of pulses has been generously raised at 8-10 per cent levels in the last two years. This led to 158 lakh hectares being brought under rabi pulses in 2016-17, against 142 lakh hectares in the previous year. Of this, gram (chana), the principal rabi pulses crop, accounted for an acreage of 98 lakh hectares in 2016-17, against 89 lakh hectares in the previous year, an increase of about 10 per cent. The sharp increase in both acreage and output in the kharif and rabi seasons of 2016-17 led to a record foodgrain output of 275 million tonnes, which included a record pulses output of nearly 23 million tonnes.

While MSP can work as a means to effect both output increase and a change in cropping patterns, it cannot work wonders in isolation. The total acreage in 2016-17 was almost the same as in 2013-14, a normal monsoon year. The two intervening years were ones of poor monsoon. The total acreage in kharif 2017 was almost flat in relation to 2016, while the area under kharif pulses was down by about 3 per cent. A push towards pulses self-sufficiency will require attaining a production level of well over 25 million tonnes.

MSP has evoked sharp reactions owing to the magnitude of the rise — farmers’ organisations claim it does not cover costs — and the tendency of the market price to fall below it. Economic Survey 2016-17 has suggested a shift towards controlling input prices and moving away from MSP in the case of most of the 23 crops by substituting it with direct benefit transfers. While trying to streamline subsidy deliveries, it should also be kept in mind that the need for farmers to live in dignity and security should not be overlooked. MSP must be supplemented with better marketing infrastructure to make it meaningful. The NITI Aayog’s suggestion of price deficiency payment is fraught with implementation issues, such as traders misusing the scheme. Hence, a multi-pronged approach of improving marketing infrastructure — creating at last five times the number of mandis (estimated at 7,700) — is a way to make price signals work better.

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