Article 3: Beyond MSP: Farmers need income, not price support
Why in news: The Madhya Pradesh government increased summer moong procurement from 25% to 60% after farmer protests over low market prices, reigniting the national debate on guaranteed Minimum Support Price (MSP).
Key Details
- Higher Procurement: MP raised procurement of summer moong from 25% to 60% and increased the eligible procurement limit from 1.2 to 3 quintals per acre.
- Price Gap: Moong is selling at around ₹7,000/quintal, significantly below the MSP of ₹8,768/quintal, causing farmer losses.
- Growing MSP Demand: Farmers across states are demanding legal assurance of MSP, extending beyond rice and wheat to pulses and oilseeds.
- Economic Significance: Assured MSP for pulses and oilseeds can reduce import dependence, promote crop diversification, and encourage sustainable farming.
- Fiscal Challenge: Universal procurement is financially unviable; Price Deficiency Payment (PDP) is emerging as a more practical alternative.
Farmers' Demand for Effective MSP
- Madhya Pradesh (MP) increased procurement of summer moong from 25% to 60% of estimated production after farmer protests.
- Procurement limit per acre was raised from 1.2 quintals to 3 quintals.
- Market price (~₹7,000/quintal) remains well below the MSP of ₹8,768/quintal.
- Farmers with higher productivity (6–8 quintals/acre) suffer the largest losses as excess produce is sold below MSP.
- Farmers seek MSP as a guaranteed entitlement, not merely a declared support price.
Expanding MSP Debate Beyond Cereals
- MSP demands now extend beyond Punjab and Haryana and beyond rice and wheat.
- Farmers cultivating pulses and oilseeds are also demanding assured MSP procurement.
- These crops are less water-intensive and require lower fertiliser use than cereals.
- India remains heavily dependent on imports of pulses and edible oils.
- Assured MSP could encourage crop diversification away from surplus cereals and sugarcane.
Economic Rationale for MSP Support
- Guaranteed MSP can improve domestic production of pulses and oilseeds.
- It can help reduce import dependence and improve food security.
- Crop diversification promotes sustainable agriculture by reducing pressure on water resources.
- Farmers receive income stability, encouraging investment in cultivation.
- Greater production strengthens national self-reliance in essential commodities.
Fiscal and Operational Challenges
- Procuring all produce at MSP would impose a huge fiscal burden on governments.
- States like MP lack the financial capacity to procure and store entire harvests.
- Large-scale procurement also requires adequate storage, logistics, and distribution infrastructure.
- Excess procurement increases carrying and maintenance costs.
- Replicating universal procurement across states is financially unsustainable.
Way Forward: Price Deficiency Payment
- Governments should compensate farmers for the gap between MSP and market price.
- Price Deficiency Payment (PDP) reduces fiscal burden compared to physical procurement.
- It eliminates the need for large-scale storage and stock management.
- PDP can be extended to pulses, oilseeds, rice, and wheat wherever market prices remain below MSP.
- A balanced approach should combine income protection, crop diversification, and fiscal sustainability.
Conclusion
Ensuring remunerative prices for farmers is essential for agricultural sustainability and income security. However, universal MSP procurement is fiscally and operationally difficult. A balanced approach combining Price Deficiency Payment, targeted procurement, crop diversification, market reforms, and investment in agricultural infrastructure can protect farmers' interests while maintaining fiscal prudence and promoting long-term agricultural resilience.
Descriptive question:
"Critically examine the demand for a legal guarantee of Minimum Support Price (MSP). Discuss its economic rationale, fiscal implications, and possible alternatives for ensuring farmers' income security." (150 words, 10 marks)
Source: The Indian Express