Editorials/Opinions Analysis For UPSC 11 February 2022
- An MSP scheme to transform Indian agriculture
An MSP scheme to transform Indian agriculture
The on-going struggle of farmers can be seen as an effort to transform Indian agriculture and the livelihoods of the farming majority.
GS III: Agricultural Pricing, GS II: Government Policies & Interventions
Dimensions of the Article:
- Key Points
- Evolution of Price Stabilization policy
- Skewed MSP Coverage
- Mechanism for Food Grain Distribution
- Need for Wider Coverage of MSP
- Mechanism to address farmers indebtedness
- Way Forward
- The recent farmers’ movement witnessed the massive solidarity of farmers despite social divisiveness.
- The movement enabled massive and effective mobilisation of various farmers’ movement across Punjab, Haryana and Western Uttar Pradesh.
- Maintaining that solidarity is essential, which means MSP must look especially into the requirements of farmers and the landless.
- Purpose of MSP?
- Price stabilisation in the food grain market,
- Income support to farmers, and
- Mechanism for coping with the indebtedness of farmers.
Evolution of Price Stabilization policy:
- Essential Commodities Act in 1955: The first step was made by the Act to counter price rise speculative private trading.
- Buffer stock policy: The public storage of food grains was developed over time. It involves the following mechanisms:
- Setting cost-based minimum procurement price;
- Paying the difference between procurement price and market price;
- Storing the procured surplus for sale through the Public Distribution System (PDS) at issue price, and
- Market intervention to stabilise price when deemed necessary.
- Green Revolution: The Buffer stock policy induced farmers to shift to a high-yielding varieties cropping pattern during the Green Revolution, while ensuring food security for citizens.
Skewed MSP Coverage:
- Partial MSP Scheme:
- This phase ensured procurement and PDS that provided assured price incentives for rice, wheat and sugar.
- However, it left out millets, coarse cereals, pulses and oilseeds.
- Cropping pattern: The partial MSP coverage skewed the cropping pattern against several coarse grains and millets particularly in rain-fed areas.
- The area under cultivation of rice and wheat from the time of the Green Revolution till recently has increased significantly while that of coarse cereals saw a drop.
- Left out crops: These crops are mainly grown in rain-fed area,
- Though they form a major part of people’s diet, they were not made available in ration shops.
- Rainfed Agriculture: Almost 68% of Indian agriculture is rain fed and the crops grown in these regions are usually more drought resistant, nutritious and a staple in the diet of the poorer subsistence farmers.
- Greater coverage of all 23 crops under MSP is a way of improving both food security and income support to the poorest farmers in rain-fed regions.
Mechanism for Food Grain Distribution:
- The distribution mechanism of the procured stock of rice and wheat at MSP is centralised.
- The food grains needs to be brought to the centralised Food Corporation warehouses for distribution.
- The food grans are milled here and made ready for consumption.
- Food grains from Warehouses are sent to back to each district/province, and from there to villages/slums/wards for distribution through fair price (ration) shops.
- The food grains are issued by the Central Government at ‘Issue Price’.
- Issue price is fixed below the Market price to ensure affordability for poor households.
- Cost Involved: The total economic cost involves:
- Subsidy for selling below market price
- Procurement costs,
- Distribution costs of freight,
- Handling costs
- Storage costs
- Interest and administrative charges
- Transit and storage losses
- Sugarcane: It comes under a separate category and involves a different Mechanism.
- All the above processes are organised through private sugar mills and is often plagued by delays.
Need for Wider Coverage of MSP:
- MSP is given in India for a list of 23 crops.
- Depending on the harvest conditions, the MSP of the crop varies within a band of maximum and a minimum price.
- The price of some selected coarse grains can be fixed at the upper end of its band to encourage their production in rain fed areas.
- All these steps benefit farmers by assuring income support, price stabilisation and food security and inducing more climate-friendly cropping patterns can be combined to an extent.
- Advantage of wide coverage of MSP:
- Income support: Income support to farmers would generate massive positive economic externalities through raising industrial demand especially for the unorganised sector.
- This will help in extending solidarity among farmers and non-farmers while creating a chain reaction of demand expansion through multipliers for the whole economy.
Mechanism to address farmer indebtedness:
- A real breakthrough in the recurring problem of agricultural debt can be made by the linking of selling of grains under MSP to provision of bank credit particularly for small farmers.
- The farmer can get a certificate selling grains at MSP which would be credit points proportional to the amount sold
- This will entitle them to a bank loan as their right,
- The Certificate can also be stored for later use depending on the fluctuations between good and bad harvest years.
- This mechanism would go a long way not only in addressing the indebtedness in the farming community.
- It also helps in administrative simplicity in disbursing bank loans.
- The effective implementation of MSP scheme can be largely ensured by decentralising the implementing agencies under the constitutionally mandated supervision of panchayats.
- The united farmers’ Movement across caste, class and gender through the panchayat and maha-panchayat system in Punjab, Haryana and West Uttar Pradesh is a significant event.
- There is a need for these movements to turn their attention to decentralising the MSP implementation mechanism.
-Source: The Hindu