Centre hikes MSP for Rabi Crops

In News

• The Centre has increased the minimum support price (MSP) for wheat for the upcoming rabi season to ?2,015 per quintal, a 2% hike from last year.
  • Oilseeds and pulses such as mustard, safflower and masoor dal saw higher MSP increases of up to 8% in a bid to encourage crop diversification.

Benefits of Increasing MSP

• Attempt to diversify:
  • The Government has increased the prices of Oilseeds and Pulses more than wheat.
  • It will promote farmers to diversify the farm produce and encourage pulses and oilseeds like masoor and sarson (mustard) rather than mere wheat and rice.
• Confidence to Farmers about fair prices:
  • The increased MSPs would ensure remunerative prices to farmers and also encourage them for sowing operations.
• Reduced Farm Distress and Rural Indebtedness:
  • The assured prices guarantee farmers a fair price for their crops.
  • This augmented and assured income can be used to reduce the debt and increase the investment.
  • It will also reduce Farmer’s Suicide.
• Food Security for India:
  • As the growing Food Crop remains profitable due to MSP, farmers tend to grow them.
  • It ensures food safety in India.
• Employment and Poverty alleviation:
  • To some extent, agriculture is a fall back option for many Indians as evident from COVID pandemic.
  • During strict lockdown due to the pandemic, agriculture showed a positive growth unlike the manufacturing and service sector.

Demerits of MSP

• Not available to all Farmers:
  • Most farmers would not get the benefits as they were still unable to sell their crops at that rate.
  • Procurement by Food Corporation of India (FCI) is highly skewed in favour of big farmers and states of Punjab, Haryana and Western Uttar Pradesh.
• Inflation higher than increase in MSP:
  • As pointed out by various farmer associations, the inflation is around 4% whereas the MSP hike on wheat is merely 2%.
• Swaminathan Committee recommended C2 Price but not accepted:
  • The government provides 1.5 times A2+FL price which is relatively less remunerative.
• Against the International Norms e.g. Amber Box Subsidy:
  • The MSP is considered to be a practice that distorts the market.
  • It has been included in the Amber Box Subsidy at WTO framework.

Relation of MSP with Farm Laws

• Recently, 3 farm laws were passed by Parliament and they were tagged as anti-MSP and anti-farmers.
• The names of 3 farm laws are 
  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act.
  • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act
  • The Essential Commodities (Amendment) Act.
• As per the farmer associations, allowing private sector in procurement business will slowly sideline the state-sponsored mandis- APMCs.
  • The government also intends to slowly remove the MSP as per these protesting organizations.
• The arguments put forth by the Government are
  • It will widen the options in front of farmers to sell their produce and may even help them get prices better than MSP.
  • More efficient and even procurement unlike the present skewed nature.
  • It will not hamper the MSP regime in any way.
    • The FCI will continue to function in the same way as earlier.
  • It will promote competition and boost agricultural infrastructure like cold storage chains, etc.

Conclusion and Way Ahead

• Inclusion of MSP guarantee in Fam laws:
  • Both parties, Government and Farmers need to come to a middle ground by sitting and negotiating

• Implementation of Swaminathan Report:
  • The C2 Price can help farmers to reduce their indebtedness.
• Promotion of OilSeeds, Pulses and Coarse Cereals:
  • For this, the processed food related to the millets and pulses can be given rebate in GST.
  • Training farmers to run cooperatives related to Food Processing can be a game changer.
• Direct Benefit transfer Schemes like KISAN:
  • The schemes like KISAN augment the farmers income without violating the international norms.

Source: TH