Do farmers need alternative to minimum support prices?
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 agriculturesupport programmes cost taxpayers $20 billion annually, according to the 2015-16 US Government Accountability Office data.
THE ISSUE
A 2015 government think tank Niti Aayog paper titled ‘Raising Agricultural Productivity and Making Farming Remunerative for Farmers’ said the basic goal of price policy 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”. This triggered the debate on MSPs.
MSPs have been “inadequate”, “ineffective” and “inefficient”, wrote economists T Haque and P K Joshi in a recent paper in the peer-reviewed academic journal the Economic and Political Weekly.
The cost of cultivation, to
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.
NEW DELHI:
which MSPs are linked, widely varies across states. But MSPs are based on a weighted all-India average. This does not guarantee equal profits to all. The latest Organisation for Economic Co-operation and Development and Indian Council for Research on International Economic 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.
SIGNIFICANCE
Farm incomes are said to be critically dependent -- at least in the case of rice and wheat -on MSP-backed procurement programme. Yet, MSPs benefit very few farmers. Only 32.2% of paddy growers and 39.2% of wheat farmers were aware of MSP, as per 70th National Sample Survey for 2012–13. Crucially, only 13.5% rice farmers and 16.2% wheat farmers were able at MSPs.
Procurement of wheat is done mostly from Punjab, Haryana and Madhya Pradesh; while rice to Punjab, Chhattisgarh, Andhra Pradesh, Haryana. For majority of produce like maize, coarse cereals, soybeans and oilseeds, MSP is hardly backed by government procurement.