THE CONTEXT: The Minimum Support Price (MSP) system, originally designed to protect farmers from market volatility is a cornerstone of India’s agricultural policy. However, its implementation has been fraught with challenges, including limited crop coverage and inadequate procurement mechanisms.
THE ISSUES:
- Inadequate Increases: The increase in MSPs for Rabi crops, ranging from 2.41% to 7.03%, fails to match the rise in input costs such as fertilizers and diesel. This inadequacy is highlighted by the Swaminathan Committee’s recommendations, which suggest higher MSPs than those currently offered.
- Limited Procurement: Despite MSPs being announced for 23 crops, effective procurement is primarily limited to rice and wheat, benefiting only a small fraction of farmers. The Shanta Kumar Committee reported that only about 6% of farmers receive the MSPs.
- Inadequate Infrastructure: Poor storage facilities lead to significant post-harvest losses. For instance, in some regions, lack of cold storage results in spoilage of perishable goods like fruits and vegetables.
- High Transportation Costs: Rising fuel prices and inadequate transportation infrastructure increase costs for farmers, reducing their profit margins.
- Limited Market Access: Farmers often lack direct access to markets due to geographical constraints and insufficient market information, leading to reliance on middlemen who take a significant share of profits.
- Inefficiencies: The agricultural supply chain involves multiple intermediaries, leading to inefficiencies and increased costs for farmers. This is particularly evident in India where middlemen dominate the procurement process.
THE WAY FORWARD:
- Modernized Trading Platform: Implement of a unified National Agriculture Market (e-NAM0) connecting all 7,000+ APMCs. Real-time market information dissemination to farmers through mobile applications. The Karnataka model demonstrates the potential where the Unified Market Platform (UMP) has Increased farmer revenues by 38% and Reduced transaction costs by 25%.
- Infrastructure Development: Construction of modern storage facilities with temperature-controlled environments. Development of integrated pack houses and processing units. Establishment of cold chain networks connecting production clusters to consumption centers. Gujarat’s comprehensive infrastructure development program has achieved a 40% reduction in post-harvest losses and Creation of 300+ modern storage facilities.
- Financial Inclusion and Risk Management: Enhanced Kisan Credit Card program with simplified procedures. Direct income support through PM-KISAN with expanded coverage. Crop insurance reforms focus on quick claim settlement and creation of price stabilization funds.
- Structural Reforms for MSP System: Implement Swaminathan Committee’s formula of MSP at 50% above comprehensive cost of production (C2+50%). Current wheat MSP of ₹2,425 should be raised to ₹2,580 to meet recommended levels. Establish direct compensation mechanism when farmers sell below MSP, estimated to cost ₹30,000-50,000 crores annually.
THE CONCLUSION:
Legalize MSP to provide income security for farmers, enhance procurement infrastructure, and encouraging crop diversification to align with market demands. There is a need for a balanced strategy that combines assured pricing with sustainable practices to ensure long-term agricultural growth without imposing fiscal burdens on the economy.
UPSC PAST YEAR QUESTION:
Q. What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low-income trap? 2018
MAINS PRACTICE QUESTION:
Q. Critically evaluate the effectiveness of the Minimum Support Price (MSP) system in addressing the economic challenges faced by Indian farmers. Discuss the potential reforms needed to enhance its impact.
SOURCE:
https://www.thestatesman.com/opinion/insufficient-msp-1503357853.html#google_vignette
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