New Delhi: Land is a finite resource. Therefore, enhancing farming output hinges on boosting farm productivity through the adoption of agricultural techniques and using emerging technologies to enhance efficiency. Any land reform in agriculture will also need attention to address issues such as farm holding, as much as the deteriorating soil quality, although the effectiveness of policies aimed at soil rejuvenation may take time to materialise.
But until an efficient farming concept is formed, we have to make do, as Late Dr M S Swaminathan had said, “You have to have minimum support price. You have to have public procurement and public distribution.” Furthermore, agriculture is witnessing a drain in labour, with successive generations within farming families increasingly reluctant to pursue agriculture as a livelihood. Addressing this socio-economic reality is crucial for making farming a more meaningful source of productive labour. Failure to do so risks pushing agriculturists towards alternative income-generating livelihoods, or even abandoning their farms.
The farmers’ demands include a legal guarantee of minimum support price (MSP) for all crops and the implementation of the recommendations of the MS Swaminathan committee on agriculture. One of the main recommendations of the committee was to increase MSP to at least 50 per cent above the weighted average cost of production. The current MSP system falls short of meeting farmers’ expectations as the final procurement by the government often fails to account for essential factors such as the imputed value of farmers’ family labour, land costs, and land interest. Instead, it primarily focuses on inputs like fertilisers, seeds, and labour, thereby failing to encompass the entire production cost.
Currently the government sets the MSP for nearly two dozen commodities twice a year on the basis of the recommendations of the Commission for Agricultural Costs and Prices. Presently, the prevailing MSP lacks legal enforceability upon the government. Consequently, there exists no compulsion for the government to procure farmers’ produce, nor can farmers seek judicial recourse due to the absence of legal backing. Consequently, the prerogative to determine both the quantity and quality of purchased crops rests solely with the government.
Farmers advocate for legislation ensuring MSP for all crops. However, the government harbours several concerns regarding this demand, including global price fluctuations, procurement pressures, export competitiveness, and central expenditure implications. One of the apprehensions surrounding MSP is its disproportionate benefits to large surplus-producing farmers in prominent agricultural regions like Punjab, Haryana, and western Uttar Pradesh. Moreover, it incentivises the cultivation of water-intensive crops such as paddy in regions grappling with groundwater stress, highlighting the urgency for crop diversification. MSP policies fail to shield farmers from market failures, price volatility, and sudden surpluses, especially amid a rise in bumper harvests.
The challenge for making an economic argument for the concept of Free Markets does not seem to apply for a politically sensitive topic – agriculture. Farmers are a part of the chain in a buyer’s market. Since their crops are harvested and marketed in bulk, it leads to sudden supply increases relative to demand, putting downward pressure on prices. Lacking the market power to influence the prices of their produce, they sell at prevailing supply-and-demand-determined rates.
In a country where agricultural income remains untaxed, it’s striking to observe prominent celebrities from various fields laying claim to farming. This phenomenon sheds light on the complex interplay between politics and economics within the agricultural sector. Additionally, while some farmers, particularly those in more affluent segments of society, enjoy substantial wealth and exemption from income tax, marginalised farmers with fragmented land holdings continue to grapple with economic vulnerability. The fact that approximately 60 crore Indians are engaged in farming underscores the concerning levels of agricultural productivity. That is where the real challenge lies. Will the broader discourse encompass agricultural reforms to permit individuals and corporations to acquire extensive tracts of farmland? The current trend of farm holding fragmentation, from micro to mini plots, with each successive land division across generations, raises concerns.
However, unlike other commodities in the manufacturing or service sectors, the lack of self-sufficiency in food has far-reaching economic implications, spanning from sovereign concerns to social welfare, inflation, and forex depletion, among others. To be equitable to farmers, it’s untenable to assert that we are a nation adhering strictly to free market principles in agriculture. Instead, we have erected a national bulwark around domestic agricultural markets. Farmers lack the liberty to export their produce anywhere, particularly abroad. In a truly free-market scenario, a paddy farmer, for instance, should have the freedom to capitalise on a rice price of Rs 200/kg in a distant country. However, this remains a distant reality. In the aftermath of Covid, we witnessed constraints on farm product exports, aimed at averting fiscal challenges and inflation. Hence, the notion of free markets doesn’t resonate with farmers, given the presence of traditional rent seekers in domestic markets. Even now, hardworking farmers scarcely receive a fraction of the final retail selling price of their produce.
Another proposed alternative is providing farmers with a fixed income instead of price support. While this may enhance economic viability for poor farmers with minimal land, it may not be advantageous for wealthier farmers with extensive land holdings. Direct income support schemes, devoid of market distortion, benefit all farmers irrespective of the crops grown or sold. However, those for whom agriculture is a primary livelihood may have a valid rationale for seeking price assurance for their crops, particularly to encourage crop diversification.
Regardless of the economic costs to the exchequer, sustainable farming practices and pricing of farm produce must be ensured. While economic theories offer perspectives, agriculture is inherently a political topic, as it intertwines people, produce, and payment. This is why MSP topic is now ‘main-stream politics’.
(The author is a Policy Researcher & Corporate advisor. He tweets at @ssmumbai )
(Disclaimer: The views expressed in this article are those of the author alone. The opinions and facts in this article do not represent the stand of News9.)
MSP and Agriculture: Annadhata will need policy, polity and long-term reforms
13
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12.02.2024
New Delhi: Land is a finite resource. Therefore, enhancing farming output hinges on boosting farm productivity through the adoption of agricultural techniques and using emerging technologies to enhance efficiency. Any land reform in agriculture will also need attention to address issues such as farm holding, as much as the deteriorating soil quality, although the effectiveness of policies aimed at soil rejuvenation may take time to materialise.
But until an efficient farming concept is formed, we have to make do, as Late Dr M S Swaminathan had said, “You have to have minimum support price. You have to have public procurement and public distribution.” Furthermore, agriculture is witnessing a drain in labour, with successive generations within farming families increasingly reluctant to pursue agriculture as a livelihood. Addressing this socio-economic reality is crucial for making farming a more meaningful source of productive labour. Failure to do so risks pushing agriculturists towards alternative income-generating livelihoods, or even abandoning their farms.
The farmers’ demands include a legal guarantee of minimum support price (MSP) for all crops and the implementation of the recommendations of the MS Swaminathan committee on agriculture. One of the main recommendations of the committee was to increase MSP to at least 50 per cent above the weighted average cost of production. The current MSP system falls short of meeting farmers’ expectations as the final procurement by the government often fails to account for essential factors such as the imputed value of farmers’ family labour, land costs, and land interest. Instead, it primarily focuses on inputs........
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