Increasing MSPs is a welcome first step in the process of overcoming the agrarian crisis but it has to be followed by more action, especially in terms of procurement and storage, says M S Swaminathan, the father of India's green revolution.
The government has approved a substantial increase in the Minimum support price (MSP) of most kharif crops, which will cost the exchequer more than Rs 150 billion.
Swaminathan said the economic and ecological health of agriculture was not good, and that was clear from the massive protests by kisan organisations and the re-occurrence of farmer suicides.
The two main demands of farmers' are loan waiver and remunerative prices.
The monsoon and the market play an important role in the profitability and stability of income in agriculture. The Centre has taken steps to improve crop insurance but the coverage and performance are still far from satisfactory, and risks are still high, leading to the demand for a higher price and credit reform, he said.
In terms of marketing support which farmers need, the policy should have three integrated components including a minimum support price, or MSP, based on the formula of C2 (comprehensive cost including imputed rent and interest on owned land and capital) + 50 per cent, a favourable procurement policy.
On the new MSP implications, he said, the MSP announced is higher in absolute terms but below the recommended level.
For example, the MSP of common paddy has been hiked from Rs 1,550 to Rs 1,750 per quintal. Taking the C2 cost of last year (2017-18) and assuming a 3.6 per cent rise in input costs based on the input cost index used by CACP, the estimated C2 cost for this year (2018-19) is Rs 1,524. So, the new MSP is C2+15 per cent, not C2+50 per cent.
In the case of ragi, the new MSP is C2+20 per cent. Similarly, for moong, the MSP has been raised from Rs 5,575 to Rs 6,975. So it is now C2+19 per cent.
Higher MSPs are welcome but there is inadequate public procurement at MSP, except in the case of wheat and rice. This is clear from the experience of farmers who cultivated more pulses on the expectation of procurement but were let down by a crash in market prices. Indeed, for many crops including urad, tur, maize, groundnut, soybean, bajra, rapeseed and mustard, the weighted average mandi price was below the corresponding MSP before the monsoon, he added.
Other steps such as those recommended by the National Commission on Farmers, which will help to improve both income stability as well as total income from farming, will have to be introduced. Appropriate measures are also needed to ensure that groundwater over-exploitation and other eco-destructive activities are limited.