Do farmers need alternative to minimum support prices?
NEW DELHI: Agriculture everywhere needs to be bankrolled because of the nature of the beast. Farm subsidies are common across economies. For instance, the US government’s agriculture-support programmes cost taxpayers $20 billion annually, according to the 201516 US Government Accountability Office data.
The mainly supports farmers by federally fixing minimum support prices (MSPS) for 24 crops apart from providing insurance, power and fertiliser subsidies. It then buys mainly wheat and rice at the MSP for distribution among the poor at a fraction of the buying price, which is estimated to cost ~1.69 lakh crore in 2018-19. Economists, including those affiliated to the government, are now debating if MSPS can adequately support farm incomes in the long run. A2015governmentthinktankniti Aayog paper titled ‘Raising Agriculturalproductivityandmaking Farmingremunerativeforfarmers’saidthebasicgoalofpricepolicy is to offer remunerative prices to farmers. But it said this cannot be “achieved through procurement backed MSP” because “it is neither possible nor desirable for the government to buy each commodity in each market in all regions”.thistriggeredthedebate on MSPS.
Mspshavebeen“inadequate”, “ineffective” and “inefficient”, wroteeconomiststhaqueandpk Joshiinarecentpaperinthepeerreviewed academic journal the Economic and Political Weekly.
Thecostofcultivation,towhich MSPS are linked, widely varies across states. But MSPS are based on a weighted all-india average. Thisdoesnotguaranteeequalprofits to all. The latest Organisation for Economic Co-operation and Development and Indian Council forresearchoninternationaleconomic Relations study showed MSPS have often been set below international prices.
MSPS have also failed to keep pace with rising input costs.
For instance, taking into account comprehensive cultivation costs between 2004–05 and 2014–15, costs of growing paddy grew by 11.2% annually in Bihar and 11.9% in West Bengal, while the paddy MSP increased at the rate of 10.6% annually.