Farming is a loss-making deal but MSP is not practical

Dr. Satyavan Saurabh *

The objective of MSP is to protect farmers from losses amid fluctuations in crop prices. Its guarantee has become the biggest issue in the country today which is not practical or possible. The Government of India announces MSP only on 23 crops. Among them, only wheat and paddy crops are purchased on MSP, because for food security and storage, the government has to make extensive purchases of these crops.

There has been a continuous demand from farmers that an MSP guarantee law should be made. This would mean that the government has promised to provide that price on paper. But the government cannot decide how much quantity it wants to buy. How much grain is given by farmers to the government? need to buy. Market prices are determined by MSP which remains high most of the time.

The major problem of the MSP-based procurement system is the functional dependence on middlemen, commission agents, and the red tape of APMC (Agricultural Produce Marketing Committee) officials. It is difficult for an average farmer to reach these markets and he depends on the market to sell his agricultural produce.

The present system produces a marketable abundance of particular crops. This leads to intensive farming year after year, which leads to soil erosion. Farmers rely on political pressure rather than adapting to the market to solve their problems. All this keeps away private investment in the sector and thus contributes to backwardness in agriculture.

This degrades the soil because no matter what the soil conditions are, certain crops are given priority over those having MSP resulting in over-exploitation of the group's water resources, alkalinity, reduction in crop production in the long run, and great harm to the environment. Loss occurs.

If MSP is brought in, the government will be looking at additional expenditure which will amount to Rs 10 lakh crore annually; Which is even more than our last year's basic budget. Therefore this demand has no meaning. Farming has indeed become a loss-making deal, but the government cannot decide the price of any agricultural product. The government also has a limit on financial resources.

The MSP system envisages a law fixing the minimum price so that the farmer does not suffer financial loss. MSP Kolekar's legal hurdles are a complex issue. Moreover, these are not just legal issues, there are also implementation issues. Legally, these cannot be resolved as easily as farmers hope they will be.

Last year, all-India average prices of jowar, tur, cotton, urad, and paddy (non-Basmati) were higher than their MSP by 5 to 38 percent. Maize prices in Karnataka were above MSP, but they were seen lower across India which may be due to lower quality in other states. This fluctuation in prices is emerging as the biggest obstacle to the guarantee of MSP.

Secondly, the main crops of Punjab are paddy and wheat, both already have MSP and the government is purchasing it. At the same time, with the enactment of the law on MSP, the government will be forced to purchase the remaining crops and it will become the responsibility of the government to store them and sell them further. Therefore the law on MSP is not easy.

MSP is always given for a “fair average quality” of the crop. That means, only when the crop is of good quality will it be purchased at MSP, otherwise not. In such a situation, if the government has given a guarantee on MSP, then how will it be decided whether the quality of that crop is good or not, and what will happen to it if the crop does not meet the set criteria?

Secondly, before including other crops in MSP, the government will also have to decide its budget. Accepting the big demand of farmers to bring every crop grown in the country under the ambit of MSP would mean dedicating the entire Union Budget to it. This will seriously jeopardize India's goal of becoming the "third largest economy" for the next five years and people will have to face higher taxation through direct and indirect taxes.

To benefit the farmers and protect them from any loss, the system of minimum support prices on crops has been running for many years. The central government decides the minimum price of crops which is called MSP or minimum support price. The question arises whether all the problems of the farmers will be solved by making MSP law. Currently, the government gives MSP on about 23 crops.

Do farmers sell all these crops on MSP? Many times it happens that many crops are sold at prices lower than MSP or higher than MSP. The prices of crops depend on the conditions to a great extent. Therefore, despite the declaration of MSP, crops are sold at different prices. The government may not have the physical resources required to store large quantities of produce when no buyer is willing to pay the Minimum Support Price (MSP).

The government will also face another concern of procurement and the pace of making those purchases. Imposition of MSP may impact India's exports, as it may be difficult to force private traders to purchase at MSP. Also, farmers who do not grow the said crops cannot support this demand as it will not bring them any benefit. It is the government that does not put the burden on the pockets of the farmers in adverse circumstances.

Farmers have to understand that declaring MSP will not benefit them. They will be benefited when their agricultural costs are reduced and their produce reaches the market without any middleman. In this era of startups, farmers should demand marketing instead of MSP. The MSP law will cause an additional expenditure of approximately Rs 10 lakh crore on the government.

For this, the basic infrastructure of the country will deteriorate or there will be a cut in medical/defense expenditure. Direct or indirect taxes will be imposed on the public. Will the country be in favor of reducing government expenditure on infrastructure and defense? Is anyone or will anyone be in favor of increasing direct and indirect taxes?

In this case, the problem is not agricultural or economic. It is not only the government's responsibility to manage the country's economy but it is the responsibility of every citizen.