Editorial

Fresh seeds

| Updated on November 22, 2021

Making MSP a legal right will be fiscally untenable   -  RAJESH N

PM’s announcement of ‘MSP panel’ is welcome, but it should proceed with clarity of purpose

In his Friday address to the nation repealing the three farm laws, Prime Minister Narendra Modi also announced the setting up of a panel to deal with issues concerning minimum support price (MSP) and the introduction of zero budget natural farming. The move should be welcomed on various counts. First, it marks the Centre’s resolve to keep the farm reform agenda alive despite the resolute opposition by farmers from Punjab, Haryana and western Uttar Pradesh. Second, the intent to include central and State government representatives, farmers, scientists and economists on the panel will add to its credibility. It should be perceived as an apolitical body that is open to consultations. Its task is actually not as daunting as it seems, as the three aspects of the reforms — introducing private wholesale markets, removing stockholding limits and promoting contract farming — are by no means newly discovered ideas. They have been on the political and executive agenda for many years; as many as 18 out of 36 States and Union Territories have permitted private wholesale markets. Contract farming is prevalent in 20 States. The Centre’s effort ran into trouble because it bulldozed the Bills through Parliament.

A reconceptualisation of MSP is a must. The demand of the agitating farmers to legalise MSP is untenable. If MSP were to be extended to 23 crops, the annual budgetary support of ₹1.3 lakh crore will have to be multiplied several times over. Though meant for 23 crops, wheat and rice account for most of the budgetary outlay. Clearly, price support is restricted to a region — Punjab and Haryana — and skewed in favour of two crops. What’s worse is that paddy cultivation is promoted in dry, non-rainfed regions, creating water scarcity. Punjab and Haryana need to be weaned away from rice towards pulses, horticulture and oilseeds, with the help of regulated private trade and contract farming, while the MSP budget can be spread more evenly across regions and crops.

At the heart of the dismay over allowing private trade is the apprehension that MSP will not prevail. But in most parts of rainfed India, MSP is non-existent, anyway. This is because APMCs operate as cartels controlled by commission agents (arthiyas). They could do with competition from private markets. However, these have not come up in recent years, despite States agreeing to them, because of the clout of the APMCs. Above all, farming needs serious infrastructure inputs in the form of storage and warehousing, for which stockholding limits can act as a deterrent. The focus in agriculture should be on boosting infrastructure and marketing, and accepting that institutions of yesteryear have now ceased to deliver. The harsh truth is that the young do not see farming as a viable occupation and are fleeing to cities. The average income of a farmer can double from ₹9,000 a month over the next few years only by creating opportunities for innovation. This paradigm shift cannot be achieved without private capital.

Published on November 22, 2021

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