Standing Committee of Parliament Recommends Legalised MSP

Recently, the Parliamentary Standing Committee on Agriculture, Animal Husbandry and Food Processing has recommended implementing a legal guarantee on Minimum Support Price, amid a slew of measures to improve farmers’ welfare.

About the Committee

• The Standing Committee on Agriculture, Animal Husbandry and Food Processing is a parliamentary committee that monitors the executive branch of the government and provides advice to the ministries.
• History: The committee was first established in 1993 during the Tenth Lok Sabha. 
  • It was originally called the Committee on Agriculture, but its name was changed in 2021 to include animal husbandry and food processing. 
  • The Ministry of Cooperation was also added to its jurisdiction in 2021. 
• Responsibilities: The committee monitors the executive branch of the government, ensures accountability, and improves the functioning of the ministries. 
  • It also provides recommendations on issues such as budgetary allocations for agriculture and climate resilient farming. 
• Composition: The Committee, constituted under Rule 331C of the Rules of Procedure and Conduct of Business in Lok Sabha, consists of 31 members: 
  • 21 members from Lok Sabha, nominated by the Speaker, Lok Sabha, and 
  • 10 from Rajya Sabha nominated by the Chairman, Rajya Sabha.  
  • The Chairperson of the Committee is appointed by the Speaker from amongst the members of the Committee from Lok Sabha.

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Recommendation of Parliamentary Standing Committee on Agriculture

• Legal Guarantee of MSP: The committee has strongly recommended implementing a legally binding MSP to ensure financial stability for farmers.
  • The committee emphasized that MSP aligns with national food security objectives by stabilizing foodgrain production and supporting public distribution systems.
  • It has proposed a roadmap for the implementation of a legal MSP and periodic reporting to Parliament on MSP coverage and market price gaps.
• Compensation for Paddy Stubble Management: The committee recommended compensating farmers for managing and disposing of crop residue, such as paddy stubble, to address environmental concerns.
• Increasing Support Under PM-KISAN Scheme: The committee proposed increasing monetary support under the PM-KISAN Samman Nidhi scheme from ₹6,000 to ₹12,000 per annum.
  • It also recommended extending seasonal incentives to tenant farmers and farm labourers.
  • The committee cited a significant imbalance between rural income growth (57.6%) and expenditure growth (69.4%), highlighting the need for enhanced support to reduce borrowing.
• Debt Waiver for Farmers: To combat rising farmer distress and suicides, the committee recommended a debt waiver scheme for farmers and farm labourers.
  • It highlighted data from the NABARD survey showing an increase in rural borrowing, with 52% of rural families in debt by 2021-22 compared to 47.4% in 2016-17.
• Increasing Budgetary Allocations to Agriculture: The committee called for higher budgetary allocations to agriculture, noting a decline in its percentage share of the central plan from 3.53% in 2020-21 to 2.54% in 2024-25.
  • Despite absolute increases, agriculture’s growth rate declined to 1.4% in 2023-24, the lowest in seven years.
• Universal Crop Insurance: The committee suggested implementing compulsory universal crop insurance for smallholder farmers with landholdings of up to 2 acres, modeled after the Pradhan Mantri Jan Arogya Yojana (PM-JAY).
• Establishment of a National Commission for Farm Labourers: It recommended establishing a National Commission for Minimum Living Wages for Farm Labourers to address their long-standing rights.
• Renaming the Agriculture Department: The committee proposed renaming the Department of Agriculture and Farmers Welfare to the Department of Agriculture, Farmers, and Farm Labourers Welfare to reflect a broader focus on agricultural labor welfare.

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Advantages of Legal Guarantee of MSP

• Income Security for Farmers: A legal MSP ensures that farmers receive a fair price for their produce, reducing income volatility caused by market fluctuations.
  • In 2021-22, only 6% of farmers benefitted from MSP due to limited procurement. A legal guarantee could expand coverage to more farmers​​.
  • The Swaminathan Committee’s recommendation to set MSP at least 50% higher than the weighted average cost of production (C2 costs) should be implemented to provide fair compensation to farmers.
• Reduction in Farmer Suicides: Financial stability through assured pricing can alleviate debt burdens, a major cause of farmer suicides in India.
  • At least 11,290 people working in the agricultural sector have committed suicide in the past decade in India, according to data by the National Crime Record Bureau.
• Encouragement for Crop Diversification: A legal MSP can incentivize farmers to grow alternative crops like pulses, oilseeds, and millets, reducing dependence on wheat and rice.
  • Guaranteed MSP for millets aligns with India’s efforts during the International Year of Millets 2023 to promote sustainable agriculture.
• Enhanced Rural Economic Growth: Increased farmer income leads to higher rural spending, stimulating local businesses and economies.
  • NABARD’s 2022-23 survey highlighted a 57.6% rise in rural incomes over five years, which could grow further with stable agricultural income.
• Food Security and Public Distribution: A robust MSP ensures consistent production of staple crops, supporting India’s Public Distribution System (PDS).
  • The Food Corporation of India procured 43% of rice and 36% of wheat production in 2019-20, ensuring food supply for welfare schemes​.
• Empowerment of Marginal Farmers: Legal MSP would formalize market transactions, reducing exploitation by middlemen.
  • Farmers often sell at prices below MSP due to lack of buyers, especially in states with weak market linkages.

Disadvantages of Legal Guarantee of MSP

• Fiscal Burden on the Government: Expanding MSP coverage requires significant resources for procurement, storage, and distribution.
  • Implementing MSP for all 23 crops may require ₹6 lakh crore as working capital annually​.
• Inflationary Pressures: Higher MSP rates can increase food prices, impacting consumers, especially the poor.
  • A 1% increase in MSP for rice and wheat has shown to raise retail prices by 0.22%​.
• State Policy Variation: Agricultural policies and conditions vary significantly across states. 
  • A one- size-fits-all approach may not be effective, suggesting a need for state-specific policies.
• Skewed Focus on Certain Crops: Legal MSP might continue the overemphasis on wheat and rice, neglecting more sustainable crops like pulses and millets.
  • Most of the field crop production is dominated by wheat and paddy due to assured procurement.
• Market Distortions: Statutory MSP could deter private buyers from purchasing crops below the fixed price, making the government the primary buyer.
  • The National Food Security Act (NFSA) already faces challenges in storing excess wheat and rice due to procurement limits.
• Environmental Degradation: Guaranteed MSP for water-intensive crops like rice and sugarcane exacerbates groundwater depletion and soil degradation.
  • Punjab and Haryana, major MSP beneficiaries, face severe water table decline due to extensive paddy cultivation.
• WTO Compliance Issues: Legal MSP could conflict with WTO’s de minimis rule, which caps subsidies at 10% of total farm output.
  • India has faced WTO challenges over its subsidies under the MSP regime for rice exports.

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Agricultural Schemes Related to MSP in India

• Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) (2018)
  • Objective: Ensure remunerative prices to farmers for their produce through price assurance schemes.
  • Components:
    • Price Support Scheme (PSS): Central procurement of pulses and oilseeds at MSP by NAFED and FCI.
    • Price Deficiency Payment Scheme (PDPS): Farmers are compensated for the difference between MSP and the actual market price.
    • Private Procurement and Stockist Scheme (PPSS): Empowers private entities to procure crops at MSP in certain areas.
  • Implemented for oilseeds in states like Madhya Pradesh under PDPS.
• National Food Security Act (NFSA), 2013
  • Objective: Ensure food security by procuring rice and wheat at MSP for distribution under PDS.
  • Significance: Supports large-scale MSP-based procurement for key food grains.
• e-National Agriculture Market (e-NAM) (2016)
  • Objective: Create a unified online marketplace for farmers to sell produce at fair prices.
  • Ensures better price realization for farmers through transparent auctions and market linkages.
• Rashtriya Krishi Vikas Yojana (RKVY) (2007)
  • Objective: Provide flexibility to states for implementing schemes promoting agricultural growth, including MSP awareness campaigns.
  • Significance: Supports MSP-related activities like procurement infrastructure development and farmer training programs.
• Procurement Schemes by Food Corporation of India (FCI)
  • Objective: Procure food grains like wheat and rice at MSP for PDS and buffer stocks.
  • Significance: Acts as a major mechanism for implementing MSP for food grains.
• State-Level Schemes
  • Mukhya Mantri Bhavantar Bhugtan Yojana (Madhya Pradesh)
    • Objective: Provide price deficiency payment to farmers when the market price falls below MSP.
    • Implementation: Farmers receive compensation for crops like soybean, maize, and paddy.
  • Telangana’s Rythu Bandhu Scheme: Provides financial support for crop production to reduce dependency on MSP.
  • Karnataka’s Raitha Siri Scheme: Promotes millet cultivation with guaranteed MSP.

Way Forward for Legal Guarantee of MSP

• Adopt Regional and Crop-Specific MSP Strategies: Tailor MSP implementation to regional agricultural practices and focus on promoting diverse crops like millets, pulses, and oilseeds.
  • States like Karnataka have experimented with region-specific MSP for ragi and millets under their state-level schemes.
• Strengthen Agricultural Infrastructure: Develop robust procurement systems, storage facilities, and transport networks to support increased MSP operations effectively.
  • The Food Corporation of India (FCI) often faces wastage issues due to inadequate storage facilities, especially during bumper harvests.
• Promote Sustainable Farming Practices: Link MSP with sustainable farming incentives, such as adopting less water-intensive crops and organic farming.
  • Punjab and Haryana, facing groundwater depletion due to paddy cultivation, could be incentivized to grow millets and pulses under MSP guarantees.
• Leverage Technology for Transparent Procurement: Introduce digital platforms for farmers to register produce, check MSP rates, and track procurement processes.
  • E-NAM (National Agriculture Market) has successfully integrated farmers into digital marketplaces, reducing middlemen exploitation.
• Expand Farmer Awareness Programs: Conduct large-scale campaigns to educate farmers on MSP benefits, rights, and legal enforcement mechanisms.
  • According to a 2015 Shanta Kumar Committee report, only 6% of farmers were aware of MSP benefits, highlighting the need for awareness programs.
• Ensure WTO Compliance: Rework MSP policies to align with WTO rules, such as the de minimis limit of 10% of the value of agricultural production for subsidies.
  • India can utilize exemptions under food security provisions to safeguard MSP policies from international challenges.
• Establish a National Agricultural Pricing Commission: Set up an independent body to decide MSP levels transparently, factoring in production costs, environmental sustainability, and market demand.
  • Such a body can avoid politicization of MSP rates, ensuring fairness and predictability for farmers.

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Conclusion

The legal guarantee for MSP is a significant step toward farmer welfare. However, for it to succeed, it must be complemented with regional customization, improved infrastructure, awareness, and alignment with sustainability and global trade norms. This holistic approach can make MSP an effective tool for agricultural growth and rural stability.