LAW ON MSP: A FARMER'S DREAM WITH A TOUCH OF REALITY

Disclaimer: The views and the opinion expressed in this article are those of the author and does not necessarily reflect the views and positions of Public Policy and Governance Society IIT Kharagpur.

Introduction:

Minimum Support Price ('MSP'), as the name suggests, is the minimum price offered to the farmers for their produce and inter alia to ensure stable income and protection against arbitrary market forces to the agriculture-dependent communities. The need for MSP legislation has emerged due to a lack of legislative backing as well as rapid farmer awakening after the 2020 - 2021 farmer protests. The primary reason for the eruption of the distress was the three farm acts that the Indian parliament passed in August 2020. Following the protests, the government in the year 2021 overturned the rules. Subsequently, to eradicate the challenges and ensure stable prices for their crop, upon the recommendation from the Swaminathan Commission, the Union government established an annual Minimum Support Price. Unfortunately, that was not the answer to the farmers' demands. Yet again giving rise to the reason for protest to framers based out of Punjab and Haryana in the year 2024.

However, it must be stated that a demand to enforce MSP as a law has existed ever since the Green Revolution in 1966-67. The Shanta Kumar Committee Report, 2015, exclaimed that only 6% of Indian farmers could benefit from MSP, while other studies corroborating it show that the issue persists even today, with less than 10% of the Indian farmers having benefitted from the procurement operations by the Government. Thus, solidifying the demand for a legal framework on MSP that shall uniformly distribute MSP to all farmers, ultimately leading to better incomes and greater economic outputs. It is noteworthy that MSP and its uniform implementation would erode monoculture farming and shift the focus from the wheat-paddy cycle to crop diversification into crops like maize, pulses, etc. Further, research also indicates that MSP has encouraged about 78% of the farmers to adopt effective methods for crop production.

THE CURRENT STATUS OF THE MSP IN INDIA

It is based on a wide variety of financial and non-financial attributes (such as production costs, intercrop price parity, etc.), which is not legally enforceable. The Act supports the notion of providing safety to the farmers from the constantly changing market prices. For example, a farmer whose crop is ready for harvest but faces hardships due to the fluctuating constraints of the market. In this situation, the MSP steps in and plays the role of a safety net to guarantee them a fair return on their investment. Currently, around 22 crops are covered under the ambit of MSP, which encompasses essential staples, protein-rich pulses, and crops that yield commercial benefits. As per a survey and data collected by AGMARKNET from 3,100 Agricultural Produce Market Committee mandis spread throughout varied States and UTs, the offered market prices fall below MSP. Even during the significant marketing season of the Kharif products, when prices were trending upward, the price fell below the MSP (in 2018-19 and 2022-23).

As a result, the issue revolves around primarily two aspects, i.e., the prices for the crops which the Indian farmers receive are below the officially stipulated MSP. As it lacks legal standing, these prices cannot be enforced as a right. Secondly, there is a limit as to how much the government can actually purchase crops at MSP. Only a few per cent of farmers are entitled, roughly 10-20%, while the majority does not receive any such benefit, thus leading to the lack of encouragement for further production.

ECONOMIC BENEFITS OF ESTABLISHING MSP AS A LEGAL RIGHT

Acting as a shield from the middlemen, the government establishes a minimum price before the plantation begins. Thus acting with the intent to make a farmer more secure and stable in their business. If the same becomes legally enforceable, then it would signify that no one would be allowed to purchase the farm produce below the stipulated MSP and, if done so, would be acting in contravention of the law. As Dr. Shashi Tharoor, a member of the Congress Party,elucidated on the reasoning for initiating the MSP as a legal right, stating that - farmers being a substantial portion of the population with their lives dedicated to occupations related to farming, if they become self-sustained as to lead a secure life, then the same shall be positively effective for the growth of Indian economy. MSP has the potential to reach the said objective as it would make the price stable, enhance the country's food security, and increase the farmers' income, who will invest more in the production of crops and farm-related occupations. However, it must also be noted that it is not the ultimate solution for growing issues like depletion of soil quality and the harmful usage of pesticides. Thus, to bring a change in the agricultural sector, collaborative efforts and steps along with the implementation of MSP are a necessity.

COMPLEXITIES IN IMPLEMENTING MSP POLICY

As a safety net, the MSP is not devoid of concerns that must be addressed. Foremost, guaranteeing a price to the farmers would act as an incentive to enhance production and raise the supply accordingly, irrespective of the market demand at that time/season. This can lead to market imbalance and elevate overall spending on crops. Second, it might increase the burden on taxpayers and pose a challenge to distribute funds for crucial segments as well. Third, the purchase by the government puts forth two options, i.e., to sell the crops at a discounted rate to the general public (can amount to loss) or store the crops for future requirements, which, if failed to be distributed or maintained, would amount to the destruction of crops. Fourth, the condition of groundwater is depleted due to the policy preference for intensive water-requiring crops like wheat and paddy, and this issue seeks attention to the requirement of agricultural diversification. Although the government has considered it and intends to shift the purchase to substitute products, the same is barred by financial restraints. Lastly, the complexities in implementation pose a challenge. The focus should be to accommodate the vast array of crops in the land, which is agriculturally diverse, by ensuring the involvement of all farmers and not leaving anyone behind exposed to market fluctuations, which at present is a far-fetched goal. Hence, there is a need for a mechanism that would ensure a fair distribution of benefits and help promote development while emphasising sustainable means of cultivation.

METHODS TO IMPLEMENT GUARANTEED MSP: HARMONIZING FARMER WELFARE AND ECONOMIC PRACTICABILITY

It must be noted that a demand for a guaranteed MSP, is not anti-free market in its economic approach. What farmers call an 'MSP ki Guarantee' or Guaranteed MSP is nothing more than an ask for the implementation of MSP through a legal framework applied uniformly for all the farmers.

A law could prescribe the following ways of uniform MSP implementation - A 'Fair and Remunerative Price' wherein mill/factory owners procure the produce directly from the farmers instead of the government. The farmers get remunerated through the Floor price system, which is dynamic enough to support procurement and production. Further, the State may establish farmer producer companies like Cotton Corporation of India to trade in farmer produce while ensuring MSP to farmers. Another approach could be to replace MSP with price- based support and replace it with income-based support. The same would help address the issue of discordant cropping patterns with the agro-climatic conditions. Price-based support impedes crop diversification, leading to soil infertility and groundwater decline. The State of MP may also show a path forward wherein the 'Bhavantar Yojana' implemented a deficiency pricing policy. Herein, farmers were compensated for the deficient prices; they received comparable MSP when crops were sold directly to the market. Inspired by this initiative, Ramesh Chand, a member of NITI Aayog, proposed a scheme titled “Deficiency Price Payments (DPP)”, which can also be brought into effect. Lastly, a criterion of 'social and personal benefit' can be added wherein only those crops would receive MSP per environment-friendly method. This would even promote sustainable development.

CONCLUSION

Legislation for MSP is not a pipe dream, nor is it the golden chicken that the farming community is looking at for their betterment. Rather, it would be a medium to enhance farmer output and develop the agricultural sector in India. In scope, MSP is an essential element of Indian Democracy, allowing farmers an effective say in the economy. Hence, a law regulating the implementation of MSPs is a must. Additionally, the “triple challenge” that India currently faces is the supply of affordable food, providing support to farmers' livelihoods and others involved in the food supply chain, along with addressing the issue pertaining to climate and resource allocations. In this era, where we need to focus on judicious usage and preservation for the coming generation, an approach that balances the same would be appreciated. Thus, solutions attaining sustainable equilibrium, maintaining the welfare of farmers, and addressing economic rationality are necessities for the success of India's agricultural sector.