If the Maharashtra government has its way, the onus for implementing the Centre’s “historic” decision to fix minimum support prices (MSP) for crops at 1.5 times their average production costs will not lie with state procurement agencies. Instead, that responsibility shall be with private trade. The Devendra Fadnavis administration has taken a decision to make purchase of any farm commodity at below MSP even by private players — be it traders or processors — a punishable offence attracting a one-year prison term and a fine of Rs 50,000. Currently, tur (pigeon-pea) is being sold in most wholesale markets of Maharashtra at Rs 3,600-3,700 per quintal, which is not only below the MSP of Rs 5,675 declared for 2018-19, but even last year’s rate of Rs 5,450. The same goes for other pulses and jowar (sorghum) — this, when the crop now being grown is due to arrive in the mandis only after about a month’s time. Even soyabean is hovering just above the MSP, after having ruled much lower last year during the peak marketing period of November-December.
If market prices for crops are below the MSPs, it only means that the latter do not reflect supply-demand fundamentals. No rational trader would obviously buy at the MSP to sell at a lower rate. The National Agricultural Cooperative Marketing Federation is, in fact, now offloading tur, moong (green gram), urad (black gram) and groundnut that it procured at MSPs last year at market prices, which are far lower. The apex state procurement agency is able to do this only because its losses will be borne by the government. Who will compensate private trade’s losses for purchases at government-determined MSPs? If they are going to risk being jailed for not paying the MSP, the safest option is not to buy at all. Who else will suffer but the farmer, if traders desert the market and there are no buyers for produce?
If the government, in Maharashtra or at the Centre, wants farmers to receive the MSP, that should be done without distorting the market. Farmers could be paid the difference between the MSP and the market-determined prices through direct benefit transfer for the quantity of produce sold by them — which is what Madhya Pradesh has attempted to do. Even better is the Telangana formula of making a flat per-acre payment, which is de-coupled from production. Let the farmer grow any crop based on market signals and let him sell at the price that traders are willing to pay. Simultaneously, introduce competition by allowing anybody from anywhere in India to buy from any mandi within the country, to create a truly national agricultural market. The best way to help the farmer realise a better price is by ensuring more buyers — not by threatening them.