Editorials/Opinions Analysis For UPSC 11 February 2022

Editorials/Opinions Analysis For UPSC 11 February 2022

Contents:

1. An MSP scheme to transform Indian agriculture

An MSP scheme to transform Indian agriculture

Context:

The on-going struggle of farmers can be seen as an effort to transform Indian agriculture and the livelihoods of the farming majority.

Relevance:

GS III: Agricultural Pricing, GS II: Government Policies & Interventions

Dimensions of the Article:

1. Key Points
2. Evolution of Price Stabilization policy
3. Skewed MSP Coverage
4. Mechanism for Food Grain Distribution
5. Need for Wider Coverage of MSP
6. Mechanism to address farmers indebtedness
7. Way Forward

Key Points:

• 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:

• Procurement:
  • 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.
• Distribution:
  • 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.

Way forward:

• 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