MSP has failed to benefit farmers: Study

Despite a steep increase in the minimum support prices (MSP) of various agri-commodities this year, farmers are unlikely to gain much, as the open market operations and manipulative practices of traders continue to hit their profitability. The fact has been highlighted by a recent study conducted by the National Centre for Agriculture Economics and Policy Research (NCAP).

The practice of MSP has only been honoured in case of rice, wheat, sugarcane and cotton in a few states, points out Ramesh Chand, professor at NCAP who conducted the study.

Farmer groups and those associated with the procurement of commodities like jute and paddy in West Bengal agree that MSP has little significance in raising farmers’ income, as in open market the price of the commodities is generally much lower.

For example, while the government had increased the MSP for raw jute for the 2008-09 season by Rs 195 per quintal to Rs 1,250, but the crop area declined by 25 per cent for the next jute year. Sources in the jute industry said the reason for the decline was the non-remunerative prices for jute cultivation, as mill owners mostly purchased jute at a rate less than the support price. However, in most cases, the mill owners showed a higher purchase price in their balance-sheets than the actual, sources said.

According to Agragami Kisan Sabha, West Bengal, general secretary Hafiz Alam Sairani, the method of determining the MSP is flawed and does not take into account the production cost itself. Also, in most cases, by the time the MSP is implemented, the market prices have already crashed and small and marginal farmers have already sold their crops, added Sairani. Thus MSP benefits only a handful of big farmers.

Also, in case of jute, procurement agencies like the Jute Corporation of India cannot absorb more than 10-15 per cent of the total raw jute production.

In case of potato also, the MSP operations failed to stop distress sale and farmers suffered worst-ever losses. In March this year, the West Bengal government, for the first time, fixed the support price for potato at Rs 2.50 a kg, to stop distress sale. However, the market price of potato did not improve much, until the government approved the transport subsidy for potato. However, it helped the traders more than the farmers.

For paddy procurement also, in most open market operations, the prices are below the MSP, according to Sairani.

Chand, in his study, also points out that often the government procurement either falls short or exceeds what is needed to be purchased by the government.