Farmers in India demand a much higher MSP for their produce due to increasing cost of production. Though the government increases the Minimum Support Price (MSP) every harvest, it does not yield a high profit to farmers.
Minimum Support Price
MSP is the floor price provided by the government to procure farmers produce. It also becomes applicable in cases when the prices fall, then the government procures the produce at MSP. It gives assurance and long term financial stability to farmers. Commission for Agricultural Costs and Prices (CACP) decides the MSP of crops based on the cost of production in the entire country, demand and supply, terms of trade, domestic and international prices.
Paddy, Wheat and Cotton Major MSP Crops
23 crops in India currently come under MSP but it has a major impact on just three crops including wheat, paddy and cotton. The MSP has developed a mono-cropping system in the Northern states of the country. The rice-wheat cropping pattern resulted in degradation of the environment, deteriorating the soil nutrient profile and depleting water table. Besides, several studies show that the government announces MSP after sowing of a particular crop depriving the farmers to plant the crops according to set prices. There are wide variations among states even in MSP of grains like wheat and paddy. Moreover, inappropriate procurement facilities pose a great challenge to farmers.
Experts suggest that farmers must be acquainted with current and future market prices to assist them in crop planning. The development of proper warehousing facilities and proper agri-logistics and processing facilities will help in easy procurement thereby, minimizing wastage. Also, there is an inclination towards the adoption of market-based instruments as an alternative. It will enable farmers to get information on future prices from the Indian commodity exchanges. Farmers can lock in their profits by paying a premium. Here, the government can assist the farmers by either fully or partially subsidizing this premium.
MSP is just a base price option giving financial security to farmers but keeps them away from earning profits available in the open market. The mechanism should support small and marginal farmers rather than farmers with large holdings. In all, the drawbacks call for reviewing the policy and creating a mechanism to support small and poor farmers through MSP.