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Recent Developments in Minimum Support Prices Address Fearmongering

Minimum Support Prices

One of the false pretexts for political parties opposing recent agriculture market reforms is that it ends the Minimum Support Price (MSP) mechanism. Our previous article, apart from busting many myths surrounding this issue had also explained how the argument that government may end MSP in public procurement has no factual basis.

Nevertheless, if you look at the recent developments at the MSP front, one would know that the present protest in some parts of the country against farm bills is nothing more than scaremongering aimed at political gains.

Financial Assistance for Paddy Procurement

₹19,444 crores was released to the states of Chhattisgarh, Haryana and Telangana for Kharif paddy procurement under Minimum Support Price (MSP) operations by National Cooperative Development Corporation (NCDC), the apex financing organization of Union Agriculture Ministry as first instalment.

This will assist the States/ State Marketing Federations in undertaking paddy procurement operations in a timely manner through their respective cooperative organizations. Chhattisgarh has received the highest amount to the tune of ₹9,000 crores. Haryana got ₹5,444 crores and Telangana ₹5,500 crores. Farmers of these three states account for nearly 75% of India’s paddy production. The timely step will help the state agencies start procurement operations immediately. It will provide the much-needed support to farmers to sell their produce at the government notified minimum support price.

MSP for Rabi Crops

A week earlier the Modi government approved the increase in the Minimum Support Prices for all mandated Rabi crops for marketing season 2021-22.

The increase in MSP for Rabi Crops for marketing season 2021-22 is in line with the principle of fixing the MSPs at a level of at least 1.5 times of the All-India weighted average Cost of Production as announced in Union Budget 2018-19. The expected returns to farmers over their cost of production are estimated to be highest in case of Wheat (106%) followed by rapeseed & mustard (93%), gram and lentil (78%). For barley, return to farmers over their cost of production is estimated at 65% and for safflower, it is 50%.

In view of nutritional requirements and changing dietary pattern and to achieve self-sufficiency in pulses and oilseeds production, the Government has fixed relatively higher MSP for these crops.

MSP-Fact of the Matter

India has been running a large public distribution system that provides food for nearly 80 crore beneficiaries. Since the Centre provides subsidised food-grains, states can run mid-day meal scheme in schools. This is possible only through public procurement on the part of the government, and thereby Minimum Support Price for farmers will stay. The present set of reforms just pave the way for market avenues beyond MSP mechanism and APMC system without doing away with any existing mechanisms.