Opinion Express View on farmers’ protest: Plainly on MSP

Farmers on a tractor march to the national capital are primarily seeking a legal guarantee on the minimum support price (MSP) for various crops announced by the Centre. Their demand is illogical and impractical. The government can “guarantee” MSP only on the crops and the quantities that it buys. It cannot obviously procure the entire produce brought by farmers to the mandis. Nor can it enforce MSP on private trade. The latter will choose to not purchase at all if asked to pay more than the prevailing supply-and-demand determined rate. A third option could be the trade buying at the market-clearing price and the government transferring the difference between it and the higher MSP to farmers’ bank accounts. But that requires generating data on how much of produce each farmer has sold and at what price. It, in turn, creates scope for market manipulation: The trade may convince farmers to sell at below normal equilibrium price and make the government foot the higher difference vis-à-vis the MSP.

Simply put, guaranteeing MSP through legislation will result in a logistical nightmare at best and fiscal disaster at worst. It’s true that farming is a business with high price as well as production risks, more so with the growing vagaries of climate change. But the solution for production loss — whether due to dry weather, unseasonal rain or pest attack — lies in crop insurance and timely payout of claims. Prices, on the other hand, basically reflect what the market wants. Cost-plus MSPs oblivious to demand conditions would only distort farmers’ production decisions, leading to over-supply of some crops and under-supply of others. The net outcome is more, not less, price volatility. What farmers probably require is a minimum income support — MIS, not MSP. That can be given via per-acre or per-farmer direct benefit transfers. Assured of a minimum income, they can make informed market-driven decisions on what crops to grow. The current MSP regime is encouraging farmers to mainly plant wheat, rice and sugarcane. An MIS, in combination with a phase-out of water, electricity and fertiliser subsidies, will induce much-needed crop diversification.

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The government must engage with the protesting farmers. The approach of confrontation — from sealing state borders with cement barricades and drilling iron nails into roads to deploying drones for dropping teargas shells — is not going to help. Farm agitations aren’t new to India. The capital itself has seen much bigger mobilisations before, including Mahendra Singh Tikait’s famous week-long rally of half-a-million cane growers at the Boat Club lawns in October 1988. Governments of those times could handle such demonstrations without over-reaction. The Narendra Modi government should learn from its own experience of the farm laws. If it had emphasised dialogue more, and not treated marchers as anti-national/criminals, it may not have had to repeal those well-intended laws. It should not repeat the mistake.