MSP Law: Farmers Are Back on the Road

Table of Contents

Introduction

Recently, farmers, mostly from Uttar Pradesh, Haryana, and Punjab, began their ‘Chalo Delhi‘ march after a conference that ended in a deadlock with Congress.

The farmers’ main objection is based on the legal guarantee of the Minimum Support Price (MSP). In addition, the farmers have stated that farm debt be waived and that the Swaminathan Commission’s (2006) recommendations be put into action.

What is the Minimum Support Price (MSP)?

About
- When the government purchases crops, farmers are guaranteed a certain amount of money or MSP.
- The Commission for Agricultural Costs and Prices (CACP) makes recommendations that serve as the foundation for MSP. The CACP takes into account several criteria, including intercrop price parity, market price trends, supply and demand, and production costs.
- The ultimate say on MSPs is made by the Cabinet Committee on Economic Affairs (CCEA), which is led by India’s prime minister.
- In addition to promoting crop diversification, the MSP aims to guarantee producers fair pricing for their goods.
Crops Under MSP
- The Fair and Remunerative Price (FRP) for sugarcane and MSPs for the 22 required crops are recommended by the CACP.
- Six rabi crops, two additional commercial crops, and fourteen kharif crops are among the required crops.
- The following is a list of crops:
  - Cereals (7): ragi, bajra, jowar, wheat, barley, and paddy
  - Pulses (5): lentil, urad, moong, gram, and arhar/tur
  - Eight types of oilseeds are groundnut, sesamum, nigerseed, toria, soybean, rapeseed/mustard, sunflower seed, and sesamum.
  - Raw Jute, Raw Cotton, Copra, De-husked Coconut, and Sugarcane (FRP)
  - Flu-cured in Virginia (VFC) cigarette
- Currently, MSPs receive notifications for 23 crops; however, procurement is only carried out for wheat and paddy crops that fulfill public distribution system requirements.
Three Kinds of Production Cost
- “A2”: This covers all cash and in-kind payments made by the farmer for seeds, fertilizers, pesticides, labor hires, leased land, fuel, irrigation, and other related expenses.
- A2 plus an estimated value of unpaid family labor is included in “A2+FL.”
- “C2”: In addition to A2+FL, it is a more complete cost that accounts for interest and rents for owned land and fixed capital assets.
Need for MSP
- Due to the simultaneous droughts in 2014 and 2015, farmers have had to deal with falling commodity prices since 2014.
- Demonetisation and the introduction of the Goods and Services Tax (GST) caused severe damage to the rural economy, particularly to the non-farm sector and agriculture.
- For most farmers, the situation is still perilous due to the epidemic and the subsequent slump in the economy following 2016–17.
- The suffering has only been exacerbated by rising input costs for fertilizer, energy, and diesel.
- It makes sure farmers get paid fairly for their produce, which lessens poverty and hardship on farms. This is especially important in states where the primary source of income is agriculture.

What are the issues about MSP in India?

Limited Extent
- While 23 crops are included in the MSP, only rice and wheat are widely purchased and distributed following the National Food Security Act (NFSA).
- The MSP implementation for the remaining crops is haphazard and negligible. This implies that the MSP has little advantage for most farmers who plant non-target crops.
Ineffective Implementation
- In its 2015 report, the Shanta Kumar Committee disclosed that farmers were receiving a mere 6% of the MSP.
- This implies that a large percentage of farmers—roughly 94%—do not profit from the MSP. Inadequate market access and procurement systems for farmers are the main causes of this.
Skewed Crop Dominance
- A lopsided farming pattern favoring rice and wheat has resulted from the emphasis on MSP for these two mainstays. There may be nutritional, economic, and ecological repercussions from this overemphasis on certain crops.
- It could not be in line with consumer desires, which would hinder farmers’ ability to make money.
Burden on Government
- A large portion of the cost of acquiring and preserving buffer stocks of MSP-supported crops falls on the government. Resources that may be used for other projects related to rural or agricultural development are diverted in this way.

Why is an MSP law being demanded?

Ensuring Financial Viability of Agriculture
- Legalizing MSP ensures that growers get a minimum price for their goods, shielding them from changes in the market and providing equitable compensation for their work and capital.
- The minimal price of food required to maintain the financial viability of agriculture is known as the MSP. The farmers will be forced into debt if they do not receive even this.
Reducing Debt Burden on Farmers
- A National Bank for Agriculture and Rural Development (NABARD) study from 2019 states that the average debt load of a farmer’s household is more than Rs 1 lakh. This is true even though farmers receive a Rs 3.36 lakh crore subsidy from the federal and state governments.
- From Rs 9.64 lakh crore on March 31, 2014, to Rs 23.44 lakh crore in 2021–22, more loans were outstanding for farmers.
- Due to the little rise in MSPs and the fact that they do not get the reported MSP, farmers are facing an increasing financial load.
- The guaranteed MSP loses all relevance for the farmers if they are forced to sell their produce for less than that amount. As a result, an MSP legal assurance is required.
Supporting Farmers’ Livelihoods
- Legalizing MSP contributes to the support of millions of farmers’ livelihoods, especially small and marginalized farmers who are more susceptible to fluctuations in the market.
- Approximately 50% of the nation’s population makes their living from agriculture and associated industries.
Risk Mitigation
- Extreme heat, floods, fire, frost, unexpected rain, and other unpredictabilities are too many risks and variables for any firm to handle. Farmers still worry about their income and are unsure about it. The farmer avoids debt and bankruptcy thanks to MSP. It must thus be protected by a formal guarantee.
- Farmers are being harmed by market factors and natural calamities. Farming is becoming more challenging due to climate change. The weather and the forces of the market cannot be allowed to dictate to the farmer.
- Legalizing MSP offers a safety net, lowering the possibility that farmers could lose money in a down market.
Addressing Market Imperfections
- Farmers cannot be the only ones responsible for protecting consumer interests by providing inexpensive grains. Customers frequently pay outrageous prices for vegetables, even when farmers sell it at a loss. This is a result of intermediaries, who require regulation.
- By giving farmers a set price directly, legalizing MSP can help alleviate these problems.
Promoting Agricultural Growth
- Approving MSP offers income security and price consistency, which incentivizes farmers to invest in agricultural output. This in turn encourages agricultural expansion and adds to the nation’s overall food security.
- Approving MSP can encourage the use of sustainable farming methods by offering price breaks for crops that are resource- and environmentally-efficient.
Addressing Disparities
- In 2015, the Shanta Kumar Committee concluded that the support price policy helped just 6% of farmers.
- Three states, Punjab, Haryana, and Madhya Pradesh, accounted for 85% of the wheat procurement in 2019–20 alone.
- Legalizing MSP can assist in reducing these problems by giving farmers a fixed, consistent price.
- Policies that prioritize farmers and revolve around the legality of MSPs aid in reducing poverty, promoting rural development, and fostering social inclusion.

What are the Main Obstacles to MSP Legalization?

Financial Burden
- Significant financial resources are needed to purchase commodities at MSP, and continuing such procurement activities might put pressure on public coffers.
- It is difficult to strike a balance between the financial allotment for MSP and other necessary expenses like social welfare programs, infrastructure development, and defense spending.
- Without the backing of supply-side and demand-side elements, legal MSP cannot function.
Disincentive for Investment
- Legalizing MSP may deter private investment in agriculture, especially for MSP-eligible crops.
- Innovation and modernization initiatives may be hampered by private actors’ reluctance to participate in industries where price manipulation by the government is common.
Exacerbate Water Scarcity
- Water-intensive MSP-supported crops like sugarcane and paddy cause overuse of water resources in areas where they are widely grown.
- Legalizing MSP might make the problem of water shortages worse by encouraging the growth of crops that require a lot of water, which would further alter cropping patterns.
Neglect of Non-MSP Crops
- Legalizing MSP might cause non-MSP crops to be neglected, which would reduce the amount of oilseeds, pulses, and other nutrient-dense food crops grown.
- Food security, dietary diversity, and nutritional results may suffer as a result, especially for disadvantaged groups.
Reduced Export Competitiveness
- Legalizing MSP might result in increased procurement costs for commodities supported by MSP, lowering their competitiveness in the global market.
- Reduced export competitiveness may arise from elevated domestic prices, particularly for commodities with high MSP rates.
Trade Disputes
- Trade conflicts with importing nations might arise from legalizing MSP, particularly if the government offers subsidies or other types of assistance to keep MSP prices stable.
- Retaliatory actions, taxes, or trade obstacles may be the outcome of such disagreements, which may have an impact on export volumes and market access. India would encounter more opposition in the World Trade Organization (WTO) if a legally guaranteed higher MSP is implemented.

Farmers’ ‘Delhi Chalo’ March

Farmers have been urged by the Haryana police not to take part in the scheduled march to the capital without authorization.
- The Haryana government has asked the Center to send at least 64 companies of central paramilitary troops, including the Rapid Action Force (RAF), according to official sources.
Farmers protested against three laws in 2020; a year later, the laws were removed from the limits of Delhi.
December 2023 saw the announcement of Delhi Chalo, which demanded the following:
- A mandate that requires all crops to have a Minimum Support Price (MSP).
- Applying the formula developed by the Swaminathan Commission.
- Farmers are completely exempt from debt.
- Pensions to laborers and farmers.
- Rejection of farmer lawsuits amid the 2020–21 demonstrations.
Several unions are leading the Farmers Protest 2.0. Several factionalisms were seen by farmers’ unions following the 2020 protest.
- There would be more than 200 farmers’ unions taking part in the “Delhi Chalo” march from all over the nation.
The actions done to prevent farmers from entering Delhi
- Delhi has implemented Section 144.
- The government of Haryana closed down its borders with Punjab.
- There are barbed wire, cement barriers, and roadside nails.
- heightened security at the nation’s capital’s entrances.

Way Forward

The list of crops eligible for MSP assistance might be gradually expanded by the government to promote agricultural diversity and lessen the dominance of rice and wheat. This will provide farmers with additional options and encourage the production of products that meet consumer demand.
The government should concentrate on establishing MSPs for crops that are crucial for food security and those that have a proven influence on farmer livelihoods, rather than offering MSPs for every crop in every location. This focused strategy can aid in the best possible resource allocation.
Enhance and update the procurement processes to guarantee farmers may obtain MSPs. This might entail extending the reach of procurement agencies, cutting out intermediaries, and developing more effective procurement processes.

Conclusion

The demand for a legal framework ensuring Minimum Support Price (MSP) reflects the urgent need to safeguard farmers’ livelihoods and mitigate financial burdens. Despite challenges such as financial constraints and potential disincentives for private investment, legalizing MSP is crucial for promoting agricultural growth, addressing market imperfections, and reducing disparities. Effective implementation and gradual expansion of MSP coverage are essential for sustaining farmer welfare and agricultural diversity.

Frequently Asked Questions(FAQs)

What is MSP in farmer protest?

The lowest price that government procurement organizations will pay farmers for their products is known as the Minimum Support Price (MSP). It provides stability and economic security for farmers by protecting them against market swings.

Why farmers are protesting again?

They have also petitioned the government to forgive their debts and to provide them with pensions. According to farmers, anyone who sells phony fertilizer, herbicides, and seeds ought to face consequences. They want 200 workdays, or twice as many, to be allowed under the government’s rural job guarantee program.

What is the new farmer’s policy?

Electronic trading and trade of scheduled farmers’ produce is permitted by the Farm Acts. bans market fees, cessations, and other levies imposed by state governments on farmers, dealers, and electronic trading platforms for the exchange of agricultural products carried out in “outside trade areas.”

How does MSP affect farmers?

Income growth for farmers: MSP boosts farmers’ income, and since they have more cash on hand, they may invest in new technologies. Additionally, it contributes to the government’s objective of tripling farmers’ income by 2022.

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