MSP: Is BJP going back on its promise?

NDA government believes steep hikes in MSPs without taking into account market conditions and requirement of the country is counter-productive

A big electoral promise of the ruling BJP during the 2014 general elections had been to ensure farmers get a minimum support price (MSP) which is 50% more than their cost of production. However, two years down the line, not just the promise of 50% over cost has remained unfulfilled, but so far the MSP rise in NDA regime has been at best nominal atleast for cereals, where the system has some relevance.

In fact, it has been an old stated stand of the NDA government that steep hikes in MSPs without taking into account market conditions and requirement of the country is counter-productive for the farming sector.

NITI Aayog member and noted agriculture economist Ramesh Chand in an interview to this correspondent some time back had indeed stated that days of price induced farm growth that is growth which has been achieved through unreasonable hikes in MSP were gone and now it is time to build permanent structures and systems like better marketing facilities, judicious use of fertilisers, better protection against crop loss and less dependency on monsoon to ensure that farm growth of over 4% is sustained over a longer period of time. One that does not fluctuate on a year-on-year basis as has been the practice so far.

The Centre too in a reply to the Parliament in an Action Taken Report on the recommendations of the Standing Committee had very clearly said that a mechanical increase in MSP by calculating 50% over cost, without taking into consideration then prevailing market conditions, stock positions, import and inter-crop parity will be counter-production for farming and promote mono-cropping.

So far under the NDA regime, in paddy and wheat, the two main crops where this system is functional on the ground due to active state procurement, the MSP increase in the two years has been less than 5% on an average.

Though in case of pulses and oilseeds, these increases have been substantial which has been further bolstered by liberal announcements of bonus. But in these crops, MSPs matter little as there is no set procurement system, while more often than not, the state-fixed support price is less than the prevailing market, making them all the more irrelevant.

For example in 2016-17 Kharif season, the Centre has raised the MSP of tur, urad and other pulses to around Rs 50-55 per kilogram, but the average price prevailing for all pulses in the market is around Rs 120 per kg.

In fact, another arm of the same government that is the Ministry of Food and Consumer is offering unpolished pulses to states at Rs 66 and Rs 82 per kilogram. Fixing an MSP lower than this does not make much sense.

Also, data has shown that mechanical increase in pulses MSP without supplementing it with proper and assured purchase mechanism does not lead to any significant diversion in the area.

The Centre has planned the purchase of around 150,000 tonnes of pulses directly from farmers at the then prevailing market rate to build a buffer stock. If pursued on a regular basis, this could encourage farmers to shift towards the crop as this would then ensure that growers have a stable and fixed market for pulses and are not subject to vagaries of the market. This could be a true game-changer in terms of pulses and their MSP.