Farmer’s Demand for Legalizing MSP
Why in News?
- Supreme Court’s Criticism: The Supreme Court (SC) of India recently criticized the Central Government for failing to engage with protesting farmers and address their grievances.
- Fresh Plea: The SC urged the Centre to respond to a plea seeking a legal guarantee for Minimum Support Price (MSP).
- This comes after prolonged protests by farmer groups, especially at the Punjab-Haryana border.
What is the Petition for MSP Guarantee?
- Petition’s Demand: It seeks a legal guarantee for MSP based on promises made during the 2021 farmers’ protests, after the repeal of the farm laws.
- The petition demands MSP to be recognized as a legal right, ensuring stable incomes for agricultural producers.
- SC’s Response: The SC suggested resolving the issue through a High-Powered Committee and emphasized the need for an immediate government response.
- Significance: The SC’s involvement adds legal weight to farmers’ demands, indicating the need for a systematic resolution.
Why are Farmers Protesting in India?
Historical Context:
- 1991 Economic Liberalisation: India prioritized industrialization over agriculture, leading to rural distress.
- Limited MSP Implementation: Though MSP is set for many crops, procurement largely benefits rice and wheat farmers, leaving others vulnerable to price fluctuations.
- WTO Agreements: The World Trade Organisation (WTO) agreements promoting free trade limit India’s ability to impose trade restrictions or provide subsidies, further aggravating farmers’ issues.
Key Demands:
- Legal MSP: Based on the Swaminathan Commission Report, which recommends a 50% profit margin over the cost of production using the C2+50% formula.
- Other Demands:
- Full debt waivers.
- Compensation and pensions for distressed farmers.
- Protection of indigenous land and water rights.
Government’s Position:
- The Centre argues that legalizing MSP is logistically unfeasible, citing high costs and potential economic implications like food inflation and budgetary constraints.
What are the Arguments For and Against MSP Legalization?
Arguments For Legalization:
- Addressing Farmer Distress: Ensures fair prices, covering production costs and providing financial security.
- Stabilizing Agriculture’s Role: Agriculture’s share in GDP has dropped below 15%, while farmer incomes remain stagnant. Legalizing MSP could bridge this gap.
- Promoting Formal Markets: Reduces reliance on informal markets and aligns with digital agriculture initiatives.
- Market Stability: Legal MSP could stabilize both farm incomes and consumer prices by reducing price volatility.
- Encouraging Investment: A predictable income through MSP could encourage investment in sustainable agricultural practices.
Arguments Against Legalization:
- Logistical Challenges: Nationwide MSP implementation is hindered by inadequate procurement infrastructure, especially in states without functional mandi systems.
- Economic Burden: Procuring all crops at MSP would strain government resources, potentially leading to fiscal imbalances.
- Food Inflation: Higher guaranteed prices could raise consumer food costs.
- Market Distortion: A legal MSP could disrupt supply-demand dynamics, creating inefficiencies.
- WTO Constraints: International trade rules may limit subsidies, undermining MSP’s effectiveness.
What are Alternatives to Nationwide MSP Legalization?
Targeted Approach:
- Implement MSP for select crops or regions to stabilize prices without overwhelming the procurement system.
- Use schemes like Pradhan Mantri Annadata Aay Sanraksan Abhiyan (PM-AASHA), ensuring fair prices through MSP and price deficiency payments.
- Example: States like Madhya Pradesh, Chhattisgarh, and Odisha have expanded procurement successfully.
Role of Cooperatives and FPOs:
- Promote Farmer Producer Organizations (FPOs) and cooperatives, as seen in successful sectors like milk production.
- Strengthen legal frameworks, modern storage facilities, and infrastructure.
- Support schemes like Pradhan Mantri Kisan Sampada Yojana (PMKSY) for post-harvest management.
Contract Farming:
- Facilitate contracts between farmers and corporations/cooperatives to secure guaranteed prices.
Crop Insurance:
- Expand and enhance schemes like Pradhan Mantri Fasal Bima Yojana (PMFBY) to protect against natural disasters and market fluctuations.
Diversification:
- Encourage diversification of crops and income sources to reduce dependence on a few volatile crops.
Key Definitions and Related Facts
- Minimum Support Price (MSP):
- A pre-determined price set by the government to ensure farmers receive a fair price for their crops.
- Currently based on the A2+FL formula, which accounts for paid-out expenses and family labor.
- Swaminathan Commission: Recommended the C2+50% formula, which includes additional costs like rent and interest on owned land.
- Mandis: Agricultural markets where farmers sell produce. Many states lack functional mandis, limiting MSP implementation.
- PM-AASHA: A scheme aimed at ensuring farmers get MSP and addressing price deficiencies.
- Pradhan Mantri Kisan Sampada Yojana (PMKSY): Focuses on infrastructure for post-harvest management, reducing losses.
- Pradhan Mantri Fasal Bima Yojana (PMFBY): Crop insurance scheme to protect farmers against unforeseen losses.
- World Trade Organisation (WTO): Regulates global trade but restricts subsidies and trade barriers, impacting India’s agricultural policies.
Conclusion
The demand for legalizing MSP highlights deeper issues in India’s agricultural sector, such as low incomes, market inefficiencies, and inadequate infrastructure. While the government cites challenges like high costs and market disruption, the farmers’ grievances primarily arise from a lack of stability and fair pricing. A balanced approach that combines targeted MSP implementation, crop diversification, and enhanced infrastructure could effectively address these challenges without overburdening the system. The ongoing protests emphasize the necessity of constructive dialogue between all stakeholders to achieve sustainable solutions. With the Supreme Court’s involvement adding urgency, the Centre must act decisively to resolve these grievances and ensure the resilience of India’s agricultural sector.
