Ineffective solution: Latest MSPs for crops will aggravate farm distress

Except in the case of paddy and wheat, minimum support price has yet to offer remunerative prices

At a time when farmers in the country are protesting against meagre returns on their produce and are demanding loan waivers, the government's pricing policy for the 2017 kharif crops might worsen their plight. The new minimum support prices (MSPs) for major kharif crops, communicated discreetly to the states instead of being announced formally from New Delhi, are only marginally higher than those of the previous season. What makes them worse is that the new MSPs, notably for cotton, moong and sunflower seed, are lower than the actual expenses incurred in cultivation, as calculated by the Commission for Agricultural Costs and Prices (CACP). This essentially means farmers are staring at a net loss in the coming season. With the exception of pulses such as tur and urad, the profit margins in several other crops are rather thin — between 2 and 4 per cent. Such low increases in MSPs are unlikely to pacify irate farmers or ease their distress.

This is more so because the overall value of farm produce has also been on a slide for several years. Data from the National Accounts Statistics 2017 indicate that between 2011-12 and 2015-16 the total value of cereals and pulses fell by 3 per cent, oilseeds by over 13 per cent, and sugar by 1 per cent. Fruits, vegetables and spices are basically the only crop groups that have seen an increase in value, although within these groups, too, the rates of some items such as onions, potatoes and tomatoes have plummeted. This has forced many growers to dump their produce on roads. Clearly, the costs incurred by farmers on inputs such as seeds, fertilisers, pesticides and labour are rising faster than the prices of their produce. A few states such as Gujarat and Madhya Pradesh have begun offering small amounts by way of cash subsidy on these crops, but even this offsets barely a fraction of the losses.

Unsurprisingly, therefore, farmers across states are asking the ruling Bharatiya Janata Party (BJP) to honour its pre-poll commitment to fix support prices at 50 per cent above actual costs. This was, in fact, also recommended by the M S Swaminathan-headed National Commission on Farmers, which had recommended that progress in agriculture should be measured in terms of the rise in farmers’ incomes instead of the quantity of farm output. Barring paddy and wheat, the MSP has so far failed to be an effective tool for offering remunerative prices. Extending market intervention-based price support to other crops should be considered after evaluating what steps are needed to make it effective and successful. Policymakers also need to explore other ways to ensure that farming stays remunerative. One such possibility could be the “price deficiency payment mechanism” mooted by a task force of the NITI Aayog. This involves setting floor prices for crops and compensating growers for any shortfall in realising these rates. Being a non-procurement based system, it can be applied to all crops and in all areas without accumulating unwanted stocks. Trying out such a setup on a pilot basis would be a reasonable starting point.