Why in the news? 

As the upcoming general elections approach, agricultural issues have once again become the focus of attention.

Context-

• • Farmers from the regions known for the Green Revolution have journeyed to the outskirts of the capital not only to express their concerns but also to influence the topics being discussed in the election campaigns.

• What is the guarantee on MSP?

• • There are legal provisions for farmers to get the MSP for all 23 crops when they sell them—a guarantee by the government to ensure that prices do not fall below the minimum. 

Key issues related to MSP in India (Produce and perish trap in India)

• Inadequate implementation of MSP- Despite annual announcements, the implementation of Minimum Support Price (MSP) for 23 crops across both kharif and rabi seasons still needs to be improved.
  • Only a small fraction, around 6% of farmers (as per The Shanta Kumar Committee, in its 2015 report), particularly those growing paddy and wheat in states like Punjab, actually benefit from MSP.
• Vicious Cycle of Debt and Suicide– Farmers trapped in a cycle of produce and perish face crippling debt and tragically, suicides. The inability to sell crops at MSP exacerbates financial struggles.
• Dependency on Intermediaries The MSP procurement system frequently relies on intermediaries like middlemen, commission agents, and officials from Agricultural Produce Market Committees (APMCs). 
  • This setup can pose difficulties for smaller farmers, limiting their access to these channels and resulting in inefficiencies and diminished benefits for them.
• Inconsistent Implementation Across States- While some states like Maharashtra and Karnataka have made efforts towards ensuring MSP through legislative measures, there are challenges due to a lack of political will and comprehensive strategies.
• Financial Burden on Government- The government bears a substantial financial burden in procuring and maintaining buffer stocks of MSP-supported crops.
  • This allocation of resources detracts from potential investments in other agricultural or rural development initiatives.
• Lack of political will- Unable to prevent purchasing of food crops below the MSP.  For example, A few years ago, Maharashtra attempted to amend its Agricultural Produce Market Committee (APMC) Act to prevent the purchase of agricultural produce below MSP, but the effort failed due to a lack of political will and a comprehensive strategy

What are the measures suggested?

• Amendment to State APMC Acts or Essential Commodities Act- Minor amendments to these laws could introduce provisions ensuring that transactions of farmers’ produce do not occur below the MSP.
• Development of Backward and Forward Linkages- Alongside legal recourse to MSP, it is proposed to develop essential backwards and forward linkages. This includes crop planning, market intelligence, and the establishment of post-harvest infrastructure for the storage, transportation, and processing of farm commodities.
• Enhancing MSP- There’s a suggestion to enhance MSP to provide a 50% profit margin over total cost, which is seen as feasible considering the current margins.
• Effective Procurement and Distribution- Emphasizing the need for effective procurement and distribution mechanisms as envisioned under the National Food Security Act, 2013, to ensure MSP and address hunger and malnutrition.
• Scheme ensure MSP- Recognizing the potential of schemes like PM-AASHA, which comprises price support, price deficiency payment, and incentives to private traders to ensure MSP, although it’s noted that such schemes have been sidelined in policy circles.
• Reducing Intermediaries’ Share– Establishing a legally binding MSP may reduce the share of intermediaries, leading to resistance from them.
  • However, this reduction could lead to farmers receiving a higher percentage of the price paid by consumers.
• Addressing Free Market Dogma- Critiquing the adherence to free market ideology and advocating for government intervention, particularly in ensuring a legally binding MSP, to address the ongoing crisis in farmer incomes.

Conclusion: Inadequate MSP implementation leads to a vicious cycle of debt and dependence on intermediaries. Solutions include legal guarantees, better procurement, reducing intermediary influence, and challenging free market ideologies to ensure fair compensation for farmers.

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