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Tuesday, June 28, 2022

Explained: Why experts aren’t buying Centre’s argument against MSP for crops

Along with cancellation of the three farm laws, making MSP legal for all crops is another major demand of the farmers protesting at the Delhi border.

Written by Anju Agnihotri Chaba | Jalandhar |
Updated: January 14, 2021 12:14:43 pm
Farmers outside Vigyan Bhawan in New Delhi on Friday. (Express Photo: Prem Nath Pandey)

While the Centre has been claiming that making Minimum Support Price (MSP) legal for all crops will put a burden of Rs 17 lakh crore on the government exchequer annually, there are economists and experts who are not buying this argument.

The MSP of 23 crops is determined by the Commission for Agriculture Cost and Price (CACP) every year, but only a few crops including wheat and paddy are procured on MSP and the rest are purchased by private players.

Along with cancellation of the three farm laws, making MSP legal for all crops is another major demand of the farmers protesting at the Delhi border.

Now, the question is how this Rs 17 lakh crore figure is being calculated?

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The government’s reply is simple — it has calculated this figure on the basis of the total production and MSP declared by the Centre for 23 crops, which includes seven cereals (wheat, paddy, maize, barley, jowar, bajra and ragi), seven oilseeds (mustard, groundnut, rapeseed, soyabean, sunflower, sesame, and niger seed), five pulses (moong, arhar, urad, chana and masoor) and four commercial crops (cotton, sugarcane, raw jute and copra) every year. These 23 crops cover over 80 per cent of India’s total agricultural produce.

Currently, there is no legal value of the MSP declared by CACP, which is not a statutory body set up by the Act of Parliament, nor is government bound to purchase all the crops on the declared MSP.

Wheat and paddy are the two crops mostly procured on MSP and that too from Punjab, Haryana, MP, parts of UP and other states by the Centre to distribute it under Public Distribution System (PDS).

Economics Professor, Punjabi University, Patiala, Professor Kesar Singh Bhangu said, “The government says that half of India budget’s expenditure will go in the procurement of all these crops if MSP is made legal, but this is not the actual case as it depends on the market circumstances of all such crops to a large extent.”

“Making MSP legal does not mean that government has to procure everything as government’s presence in the market will help stabilise the market price if farmers get too low prices for their crop in the open market against the declared MSP, which is calculated only to decide a benchmark for a crop,” said a senior professor from Punjab Agriculture University (PAU), Ludhiana.

The professor further said: “In Punjab where wheat and paddy is procured on MSP, private players also give good prices for both crops to farmers, even a little more than the government because they know that only if they offer a little extra will farmers sell to them. Otherwise farmers have the option to sell to the government. However, this is not the case in Bihar where farmers are at the mercy of only private players and the government’s intervention is negligible due to repeal of APMC Act there in 2006.The point I want to make here is that the government’s presence always helps in keeping a check on the rates of the crop.”

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A senior officer in Punjab Mandi Board (PMB) pointed out: “In Karnataka, the state government has adopted Market Intervention Scheme for tur (arhar). There was a production of 14 lakh tonnes of tur dal there last year but the government was required to procure only 2.5 lakh tonnes because after this the market rate stabilised. This shows that just 15 per cent procurement by the government led to stabilisation in prices of tur in the market. The presence of the government in the market makes a huge difference to keep private traders — who indulge in cartelisation in the absence of any government control — in check.”

Such examples show that the government does not need to procure the entire crop, barring in some utterly exceptional cases, which happens rarely, said a senior officer in Food Corporation of India (FCI), adding that in case of cotton too, in Punjab last year, the Cotton Corporation of India (CCI) had purchased only 35 per cent cotton and remaining was purchased by private players as CCI’s entry had stabilised the prices.

“To keep the market forces under control, government’s intervention is a must, which can be possible only when the government will make MSP legal as it will keep a check on the middlemen too and provides huge competition,” said the FCI officer.

A senior officer in the CCI said that in case of cotton, when traders offer low price, CCI enters to purchase on MSP and then manufacturers and traders get the same cotton at higher price, which they mostly avoid and try to offer farmers close to the MSP.

The experts also said that India is the third largest exporter of rice (non-Basmati). In 2019, the country had exported non-Basmati rice worth $3,583 million against the total export of non-Basmati worth $17,200 million and if the country says it has surplus paddy, it can move to capture the international market in rice export.

“India is importing 2.53 million tonnes of pulses and 2/3 of its oilseeds. If we make MSP legal for such crops, the import of pulses and oilseeds can be cut down manifold and this amount, which is spent on import, can be utilised to pump in MSP regime,” they said.

“Making MSP will make country more self-reliant in various agri produces and make farming a remunerative venture for half of the country’s population which is involved in farming as there are 146.45 million (14.6 crore) operation agricultural holdings in India as per the agriculture census of 2015-16, which means that 65-70 crore people are dependent on agriculture in the country,” said Jagmohan Singh, general secretary Bharti Kisan Union (BKU) Ekta, Dakuanda.

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