The ongoing farmers’ protests against the agriculture reform bills passed by Parliament have seemingly crystallised into a single demand: Make the minimum support price (MSP) a legal right. The main concern articulated by protesters is over the government — in the guise of giving farmers the freedom to sell outside state-regulated wholesale mandis — gradually discontinuing its MSP-based procurement operations. The Narendra Modi government has denied this. Not only did it announce the MSPs for rabi crops on September 21 (as against October 23 last year), but the procurement of the current season’s paddy has also been kicked off five days before the usual date. PM Modi has stated that the “system of MSP will remain” and “government procurement will continue”. However, these assurances have cut no ice so far. Farmer organisations want the MSP to become an entitlement, similar to the right to subsidised foodgrains (under the National Food Security Act), work (under the MGNREGA) or free and compulsory education for children.
On the face of it, it is a fair demand. Farmers have saved the day. They produced all the grain that was given out free to alleviate the distress of people most impacted by the COVID-19-induced lockdown. Agriculture was also the only sector that grew even as the Indian economy contracted 23.9 per cent year-on-year during April-June. Farmers have every reason, then, to feel suspicious about the hurried manner in which the recent reform legislation was rammed through. But seeking redress by giving statutory backing to the MSP makes no economic sense. There are established institutional mechanisms — the public distribution system (PDS), gram panchayats and government schools — to ensure right to food, minimum workdays and education. But what can the government do if safflower, nigerseed or ragi prices fall below the MSP in hinterland markets? How much can it buy and how would it dispose of these crops — unlike rice and wheat that are at least sold through the PDS? Once the MSP becomes a “right”, the government is duty-bound to enforce it. In this case, successful enforcement would mean not just distorting, but supplanting the market.
The time has come to rethink the MSP. Farmers would be better off with income support that is crop-agnostic. The idea of a universal basic income (UBI), mooted in the 2016-17 Economic Survey, is worth considering. Let all 12 crore-odd farm households receive a UBI of, say, Rs 24,000 annually, which is four times the amount already extended under PM-Kisan. The extra money required can be found by phasing out the MSP and all market-distorting input subsidies. A UBI to complement the three reform laws will unleash the transformative potential of Indian agriculture.