Relevance: GS-3: Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing

Key Phrases: Minimum Support Price, Commission for Agricultural Costs and Prices, Procurement System.

Context:

• Recently NITI Aayog Governing Council held a meeting under the chairpersonship of Prime Minister.
• In this meeting, much emphasis was laid on making the minimum support price (MSP) for crops more effective.
• Thus, a discussion related to farm support prices comes to the fore.

Background

• A support price in the farming sector is a benchmark line and if prices fall below this, the government helps the farmers financially.
• Similarly, Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
• MSPs are announced by the Government at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).

Twin Objectives

1. MSP is to protect the producer - farmers - against excessive fall in price during bumper production years, thus supporting the farmers from distress sales.
2. It aims to procure food grains for public distribution and ensure food security in the country.

Ongoing discussions related to MSP

• While some States are demanding higher MSP, others are seeking a more robust procurement system, especially for oilseeds and pulses.
• Some of the states have raised the demand for crop diversification as well.
• Some are of the opinion that the higher MSP alone cannot ensure higher production and productivity or crop diversification. While others say that a robust procurement system alone cannot deliver sustained benefits to growers.
• There is little policy effort to boost consumption of key food crops, despite the fact that our per capita availability is relatively low and there is a skew in the pattern of consumption.
• How can crop diversification happen without creative disruption of the entrenched cropping systems?

Risks involved in agriculture sector

• Agriculture is subject to several risks including weather, production, quality, market, and price. Crop cultivation is seasonal and regional in nature.
• During the short marketing period, prices tend to collapse because of a perceived glut.
• As our domestic markets are largely integrated with the global markets through trade and investment routes, our crop prices often tend to reflect global trends.
• While growers deserve support, a routine hike in MSP season after season does little to drive crop production and productivity. Over the years, MSP has ceased to be an instrument to encourage crop choices or diversification.
• MSP not backed by a robust procurement system is doomed to fail, especially in the context of a production-centric approach.

Suggested Measures

• Procurement becomes all the more imperative in the event crop prices fall below MSP. Currently, several parastatals engaged in crop procurement (grains, pulses, oilseeds) seem to be unequal to the job in terms of quantities procured and geographies covered.
• It is time to enlist the services of the private sector to complement and supplement the efforts of the government parastatals.
• The crop procurement policy must take into account environmental concerns as well. Grain mono-cropping (rice and wheat) and open-ended procurement at support prices are leading to disastrous environmental impacts.
• A holistic approach to agriculture is called for. With MSP we need a robust but nuanced procurement system that helps advance sustainability.
• An appropriate trade (export/import) policy and tariff (customs duty) policy is necessary which must seek to protect the interests of domestic growers, without compromising the interests of consumers.

Way Forward

• If our policies focus on boosting consumption as much as on production, the downward price pressure faced by growers will ease.
• The need of the hour is to boost the consumption of essential food commodities including pulses and edible oil, especially targeted at the vulnerable sections of the population facing the brunt of undernutrition i.e. pervasive protein and calorie deficiency.
• Food and nutrition security is critical and agriculture is India’s largest private sector enterprise (Approx. 113 million farming families and each farmer is an entrepreneur).
• Although farmers are risk takers, they have historically been challenged and vulnerable to huge uncertainties. Agriculture accounts for 15-18 percent of our national GDP but provides livelihood for over 50 per cent of the workforce.
• Newer issues including worsening land constraints, looming water stress and climate change are sure to pose additional challenges.
• While these daunting issues must engage the attention of policymakers, there is much more to India’s farm sector policymaking than a simplistic production and price-centric approach.
• A combination of MSP plus robust procurement with environmental consciousness plus a judicious export/import policy combined with a sound tariff policy that dynamically adjusts to global and domestic market conditions and above all, policies to boost consumption are the need of the hour.
• We need to reimagine our farm policies and review the working of related institutions.

Source: The Hindu BL

Mains Question:

Q. Although farmers are risk takers, they have historically been challenged and vulnerable to huge uncertainties. Discuss in the context of demand for minimum support prices in India. [250 Words].