Legalising Minimum Support Price in India: An Apolitical Approach

The Centre has come back to the right path by announcing the withdrawal of the three contentious farm laws; and has to keep the constraints into consideration before announcing any so-called farmers’ welfare scheme in the coming years. However, protecting the welfare of farmers is a multidimensional initiative and a multistakeholder responsibility. The Central Government has to be assisted by state governments and farmers’ associations in its responsibility of protecting the welfare of farmers.

The Indian Prime Minister’s announcement about the repeal of the three highly-opposed farm laws by the Centre in the upcoming Winter Parliamentary Session on Shri Guru Nanak Jayanti was viewed by many as a victory to the indefinite demonstration staged outside Delhi’s border by farmer associations affiliated with the Samyukt Kisan Morcha (SKM). Many anti-farm laws leaders such as the Bengal Chief Minister and TMC-supremo, Mamata Banerjee, condemned the farm laws and related developments in the past year as BJP’s cruelty towards farmers.

While one may be able to spot the obvious political agenda behind the reaction of BJP’s political adversaries, the due focus has to be diverted towards the reaction of the members of SKM and whether they’re about to halt their year-long dharna in the Delhi border. Many leaders and senior members of SKM and SKM-allies such as the Bharat Kisan Union (BKU) have announced that the demonstrations would continue until the Centre actually repeals these laws in the Parliament. Another demand put forward was the legal guarantee for the Minimum Support Price (MSP) system for all 23 main crops produced in India for farmers of all states. “We will wait for the day when the agricultural laws are repealed in the parliament. Along with MSP, the government should also discuss other issues of farmers,” expressed BKU’s leader, Rakesh Tikait.

Also Read: Agri Bills: Why are Farmers Protesting even after PM’s Assurance?

Importance of providing legal guarantee for MSP: An Analytical Approach

The MSP is laid down by the Ministry of Agriculture & Farmers Welfare in consultation with the Commission on Agricultural Costs and Prices (CACP). While the ministry announces the MSP for 22 crops harvested in India before the start of the sowing season, the awareness about the announcement of MSP is very low across states. According to the Evaluation Report on the Efficacy of Minimum Support Prices (MSP) of Farmers published by NITI Ayog in January 2016, a major fraction of the crops was not sold at MSP in states such as Bihar, Assam and West Bengal, for reasons such as lack of Paddy Procurement Centres (PPCs), lack of transparency in the MSP system and the high involvement of middlemen in the procurement of crops. While most of the farmers across India knew about MSP for their crops, they were not aware that the MSP were announced even before the sowing season commenced. A major share of the farmers, according to the report, are made aware of the MSP only after the sowing season concludes. In states such as Andhra Pradesh, the farmers felt that the MSP were lowly priced as it didn’t cover their complete agricultural costs, let alone ensuring them the minimum 50% increased income than the agricultural costs. However, farmers in states such as Tamil Nadu have expressed that the MSP for paddy procurement ensured decent remuneration as MSP were higher than local market prices.

While the trend surrounding procurement (wholesale) prices and MSP were state-specific and varied greatly, most of the farmers in almost all states across India were in favour of MSP as they believed it floored the prices for their produce and stabilised the wholesale price. MSP is also believed to provide a psychological assurance to farmers as it regulates the procurement prices from dipping lower than agricultural costs. It has to be noted although the government has most of the time followed the recommendation of CACP while assigning the MSP for crops, there are a few cases where the government has assigned MSP below the recommended price. In Tamil Nadu, the MSPs of groundnuts, black gram and green grams were below the CACP-recommended price in 2016 which triggered an uproar among Tamil farmers as they were not able to recover the expenditure that went into crop production. Although 2021-22 MSP for Kharif crops was assigned exactly as recommended by the CACP report, many farmers fear that the lack of legal guarantee for MSP might prove to be a loophole for intermediaries and private players to exploit the farmers to sell their produce on a much lower price. In fact, another analysis of the 2016 Niti Ayog report suggested that only 6% of the farmers across India benefitted from MSP.

Also Read: Perception, Reality, and Optimality: The MSP Composite in relation to the Farm Acts

While the government is opposed to the legalisation of MSP saying that it might place a huge burden on the financial budget, many experts have observed that the government has been procuring lesser than 35% of agricultural produce over the last few years. In 2015, the government procured a mere 23% of the wheat produced in the country and 33% of the paddy produced. Although the figure raised to 43% in 2019, it is still not an overcommitment that will stress the budget, according to economists. Economists have expressed that the legalisation of MSP shall not place the government under any obligation, whatsoever, to procure all the produce from the farmers. The legal enforcement of MSP across the country will ensure the stability of market prices and the private players are forced to offer a price higher than MSP. It is believed that the legalisation of MSP will enhance the selling options for farmers.

One may argue that the second farm law: The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act of 2020 was also poised at expanding the market for agricultural produce and giving the farmers the freedom to sell their produce directly to dealers and incentivised contract-farming. However, the farmers expected the emphasis on MSP in this law, which was nowhere included. Moreover, with the first farm law abolishing state-controlled Agricultural Produce Marketing Committees (APMCs), the farmers fear the situation where they’re forced to sell their produce at very low prices in the absence of APMCs that regulate market prices favourable to the farmers. This is why protests continued despite PM Modi and Agricultural Minister Narendra Singh Tomar reassuring that the MSP still applied. It is clear that the farmers don’t want a law that inorganically forces them to explore alternative markets for their produce without any security vis-à-vis procurement price. Instead, they want a legal guarantee that would ensure that the MSP is strictly adhered to for all 23 crops produced in India across all states. Therefore, if the Centre really claims to work for the wellbeing of farmers, they are left with no other choice but to approve this demand of the farmers along with repealing the farm laws.

Also Read: Where are Topsy Turvy Farmer Protests Heading?

Responsibilty of State Governments and Farmers’ Associations in Assisting the Centre

With this being said, many states in India do not have functional procurement centres or mandis where the farmers could sell their produce directly in the market without the intervention of intermediaries. The situation is worse in states like Bihar and Assam, where the APMCs and procurement centres are either repealed through a state-level law or are non-functional and scarce. Therefore, farmers in states like Assam and Bihar have been relying on private players and intermediaries to sell their produce, who offer prices way lower than the MSP. Farmers in states like West Bengal, as mentioned earlier, complain of the lack of a transparent system of MSP and suspect cartelisation in view of the monopoly of state-backed private players in APMC-authorised mandis. Since APMCs and mandis come under the mandate of the respective state, the state governments also have to play a pivotal role to assist the Centre in redressing the grievances of farmers by setting up more procurement centres and mandis along with strengthening the enforcement of the APMCs and ensure that the crops are procured not lower than its MSP. SKM and its allies have to organise awareness campaigns where the farmers are made aware of the MSPs before the sowing season commences. It is clear that redressing the grievances of farmers is not a Union Government-centric responsibility; multiple stakeholders such as state governments and farmer unions have to collaborate and cooperate with each other to fulfil this responsibility. Leaders like Mamata Banerjee should drop counterproductive strategies such as merely attacking the Centre for every farmer-related grievance and should fulfil the responsibility of the Bengal State Government by promoting the efficacy of APMCs and demystifying the MSP system practised in procurement centres and mandis. 

It is evident that protecting the welfare of farmers is a multidimensional initiative and a multistakeholder responsibility. The Central Government has to be assisted by state governments and farmers’ associations in its responsibility of protecting the welfare of farmers. While there are a lot of political elements surrounding the three contentious farm laws and the protests staged against them, this article tried to decrypt the issue and analysed the need for legalising MSP while elucidating on the role of farmers associations and state governments from a purely apolitical lens.

It is to be noted that the farmers are in appreciation of government initiatives such as integrating APMCs across India into National Agricultural Markets (NAMs) which offers organic alternatives for farmers for selling their produce. They are only opposed to inorganic initiatives such as these farm laws which replaced procurement options for the agricultural produce instead of adding new ones. The Centre has come back to the right path by withdrawing the three laws; and has to keep these constraints into consideration before announcing any so-called farmers’ welfare scheme in the coming years.

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