Two related developments linked to farm support prices took place recently — one, the introduction of Andhra Pradesh Farmer’s Produce Support Price Act 2023, and the other, a potential breakthrough on the contentious issue of permanent solution for public stock-holding subsidies at the WTO.

Farmers have for long demanded MSP to be made legally binding.

The MSP mechanism was put in place to ensure remunerative prices to farmers, where the government procures grains if market prices fall below MSP.

But the price support system works effectively only in some States and some crops.

It is estimated that about one-third of wheat and paddy is procured at MSP and half of this procurement is from Punjab and Haryana.

According to the Shanta Kumar Committee only 6 per cent of farm households sell paddy and wheat at MSP to government agencies.

In this context, it is doubtful if the Andhra Pradesh Farmer’s Produce Support Price Act 2023 would deliver the desired results. The administrative machinery needed, the risk of rent seeking behaviour and red tape in the system are some of the issues that have to be addressed.

The State already has an e-Crop portal for registering the crop acreage by individual farmers. If this portal is used for enrolling farmers for MSP then tenants may get excluded.

For, the portal has compulsory parameters such as khata number or survey number.

Tenant farmers dominate AP’s farm landscape and it is doubtful if tenancy certificates given to tenants with owners consent would help. There is no provision for it in the e-Crop portal.

MSP hurdle

The fixing of support prices is also a hurdle in giving statutory guarantee for MSP.

Traders cannot be forced to buy if the MSP is above market prices, in which case the government becomes the sole buyer.

Maharashtra tried this in 2018 and withdrew it after traders refused to lift the produce at MSP when the market prices ruled lower.

Any initiative that distorts the market will not be sustainable. When market prices rule below MSP, the government can help farmers with an income support.

WTO woes

Some countries have raised objections against MSP at the WTO.

India has been able to resist so far on the grounds of food security to the poor, and the Bali ‘peace clause’ of 2013 has bailed us out even when we exceeded the 10 per cent cap.

While the developing nations are arguing for removing the 10 per cent cap (on production value) on food procurement subsidies or calculate them based on recent external reference prices instead of 1986-88 base, a permanent solution is nowhere in sight.

Now the EU has agreed to negotiate with a focus on adequate safeguards considering suggestion of the WTO Agriculture Committee chair. But the US is not flexible and the pressure on India may further mount to limit or do away with MSP.

Added to this, if MSP is accepted and legalised at 1.5 times Cost (C2) as is being demanded, our situation at the WTO will become indefensible.

A few income transfer schemes like Rythu Bandhu of Telangana, PM Kisan, Kalia of Odisha and the like could have been designed to address this issue of price compensation.

But these schemes do not address the issue of compensating tenants.

With ever increasing production costs and stagnating yields in agriculture, durable solution lies in reducing costs through technical change and/or agronomic/agro-ecological approaches.

The writer is an Agricultural Economist and former Chief General Manager, Nabard. Views expressed are personal

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