The concept of minimum support price (MSP) dates back to a suggestion made in 1954 by Frank W Parker, a US-based soil scientist and fertiliser expert, who visited in India on an invitation by the Food and Agriculture Ministry.
Prime minister Lal Bahadur Shastri, whose Cabinet introduced the MSP in 1964, later championed the slogan “Jai Jawan, Jai Kisan”. But, ironically, agriculture turned into an unattractive occupation. A survey by the Centre for the Study of Developing Societies, Lokniti for Bharat Krishak Samaj in December 2013 showed that 76 per cent of farmers would prefer to leave agriculture as an occupation. This has been pointed out by similar surveys over time.
Too much borrowing pressure on small and marginal farmers has crushed them. The National Crime Records Bureau of India reported that a total of 296,438 farmers have committed suicide since 1995, of whom 60,750 were just in Maharashtra. The Census data reveal that from 1952 to 2011, occupation in agriculture reduced to 54.4 per cent from 69.9 per cent. But agriculture’s contribution to the country’s GDP disproportionately declined to 14.4 per cent from 51.9 per cent.
C Subramanian, agriculture minister in the then Shastri government, took a leading role in the formation of the Agricultural Price Commission in January 1965. It was renamed Commission for Agricultural Costs and Prices (CACP) in 1985. The commission has the responsibility to fix the MSP for a set of 23 crops, 14 kharif, 7 rabi crops and two other crops.
The CACP takes into consideration basic input costs and the imputed cost of family labour, but does not consider either opportunity cost of investment in assets employed in agriculture or the notional rent of the owned land of the farmers. The Commission argues that majority of the farmers do not incur the notional cost towards rent. However, the profit margin for small and marginal farmers is very low, compared with any other sector of business.
After passing of the current farm laws, sale of agricultural produce will be allowed even outside the Agricultural Produce Marketing Committee (APMC) mandis. Private trading sans levies, taxes and market fees, so long an unofficial exercise, will thus now be permitted. Due to the new law it is anticipated that the APMCs will deal mainly with government procurement, led by Food Corporation of India (FCI). The States, which can’t match their public distribution system demand from their own production, take the deficit from the FCI central pool. The Dalwai Committee, as part of the effort to double farmers’ income, observed in 2018 that 26.77 per cent of total wheat and 31.30 per cent of paddy production accounted for most of the crop procurement from 2002 to 2018. But a wide disparity exists among States in procurement.
In Punjab and Haryana, respectively, 89 per cent and 85 per cent of production of paddy was procured during 2018-19. But in West Bengal and Uttar Pradesh, the two leading paddy producing States, only 7.3 per cent and 3.6 per cent, respectively, was procured. The situation is similar with respect to wheat. As farming in Punjab and Haryana is under the control of big farmers, they will benefit most from such a procurement policy.
In the North-East and many other States, as well as for crops other than wheat and rice, there does not exist any effective procurement operation. Farmers are forced to sell below the MSP. Exceptions are tur dal and soya in Maharashtra, for which the market price remains higher than the MSP.
Home Minister Amit Shah recently claimed that the MSP for wheat and paddy has increased by 41 per cent and 43 per cent, respectively, since 2013-14, while support prices of pulses and oilseeds have increased up to 65 per cent.
But farmer organisations are demanding that only legalising MSP would satisfy them. Punjab recently passed laws which among other clauses legalises the MSP for wheat and paddy, not taking others into consideration.
Given the FCI’s stocking constraints and stretched financial position, and the States substantially losing revenue and thus buying power, the demand of legalising the MSP is not likely to be accepted. Government procurement at MSP, which reportedly supports only 6 per cent of the total farmer population, is perhaps getting more attention than that it deserves.
The writer is Professor of Commerce, Vidyasagar University, Midnapore