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Introduction

The MSP (Minimum Support Price) system in India guarantees farmers a fixed price for their produce, irrespective of market fluctuations. Following the repeal of the farm laws in November 2021, there were renewed demands for a guaranteed MSP as it had been the second major demand throughout the farmers’ protest.

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Role of MSP in safeguarding farmers’ interests:

• Income Security: MSP ensures that farmers have a guaranteed income, irrespective of market volatility. For instance, if market prices for wheat fall due to an oversupply, the MSP ensures that farmers still receive a set price per quintal, safeguarding their livelihoods.
• Risk Mitigation: Farming involves significant risks, including unpredictable weather and pests. The MSP serves as a form of insurance. If a farmer experiences a poor yield, the impact is somewhat lessened because the price for their crops is assured.
• Credit Access: Banks and other financial institutions are more likely to extend credit to farmers when the MSP system is in place, as it guarantees a minimum return on crops. This helps farmers invest in better farming equipment and techniques.
• Buffer Against Exploitation: Small and marginal farmers, who constitute a large portion of Indian agriculture, often lack bargaining power. They are vulnerable to exploitation by middlemen thus the MSP helps protect these farmers, ensuring they receive a fair price.
• Rural Economy Stimulation: MSP infuses cash into rural economies, helping to alleviate rural poverty. It allows farmers to spend on goods and services, thereby spurring local economic activity.
• Market Power: MSP gives farmers more bargaining power when selling their produce in the open market. If the market price is below the MSP, the government procurement can act as a competitive buyer, which can lead to better prices even from private buyers.

Factors which are hindering its effectiveness to prevent agrarian distress and ensure consistent farm incomes:

• Limited Coverage: While MSP is declared for 23 crops, procurement largely happens for rice and wheat, leaving farmers of other crops unprotected. This was seen during the onion price crash in 2018, causing severe distress to farmers.
• Uneven Implementation: Implementation of MSP varies across states. For example, Punjab and Haryana  have  a  robust  MSP mechanism, but in states like Bihar, the procurement system is inadequate, making the MSP ineffective.
• Inadequate Price Determination: The calculation of MSP has been criticized for not adequately taking into account the costs borne by farmers. The protest by farmers in Rajasthan in 2017 over the low MSP for garlic highlights this issue.
• Monoculture Encouragement: The assurance of MSP for certain crops has led to a pattern of monoculture, particularly rice and wheat, causing environmental issues like soil degradation and groundwater depletion, particularly in Punjab.
• Ineffectual Price Support Scheme: The Price Support Scheme (PSS) intended to procure pulses and oilseeds at MSP, often fails due to logistical issues and budget constraints, as witnessed during the pigeon pea price collapse in Maharashtra in 2017.
• Lack of Awareness: Many farmers, especially small and marginal ones, are not fully aware of the MSP system and its benefits. Lack of awareness can lead to farmers selling their produce at lower prices to middlemen or private traders instead of seeking the MSP. Example- Only 4.3% of farmers who grow Ragi in the Rabi season are aware about MSP.

Suitable way ahead in this regard

• Inclusive MSP: Expanding MSP to a wider variety of crops will provide price assurance to a larger group of farmers. For example, expanding MSP to crops like millets can encourage their cultivation, offering both nutritional and environmental benefits.
• Robust Procurement Mechanism: An efficient procurement mechanism can ensure equitable benefits from MSP. Bihar’s initiative, “Dhaan ka Saamman,” is a prime example, where improved procurement centres and direct transfers led to a significant increase in paddy procurement.
• Improving Infrastructure: For instance, Gujarat’s rural warehousing scheme, where farmers are provided with on-farm storage facilities, can serve as a model for preventing post-harvest losses and enabling farmers to sell at favorable prices.
• Awareness Programs: Enhance efforts to educate farmers about MSP and procurement procedures. The successful use of digital platforms, like the ‘Digital Green’ initiative in Bihar and Odisha, demonstrates how digital technology can facilitate awareness generation.
• Limiting Middlemen: Technologies like e-NAM (National Agriculture Market) can be leveraged to connect farmers directly with buyers, thereby reducing the influence of middlemen. For example, many farmers have been able to sell their produce at better prices thanks to e-NAM.
• Scientific Cost Calculation: Implement a scientific and transparent mechanism for calculating the MSP, considering factors such as comprehensive cost of cultivation, market trends, and regional variations.

Conclusion

As India navigates the path towards agricultural reform, a revitalized MSP system will continue to play a pivotal role. Going ahead, fostering awareness and leveraging technology for implementation of the MSP, India can look forward to a sustainable and prosperous agricultural future.

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