While in principle, minimum support price (MSP) exists for most farmers for most crops, its realistic impact is quite limited for most farmers in the country, the Macro Economic Survey for 2015-16 said.
“In Punjab and Haryana, almost all paddy and wheat farmers are aware of the MSP policy. However, very few farmers who grow pulses are aware of an MSP for pulses.
Even for paddy and wheat where active procurement occurs, there is a substantial variation across states – with only half or less paddy and wheat farmers reporting awareness of MSP, especially in states such as, Gujarat, Maharashtra, Rajasthan, Andhra Pradesh and Jharkhand.”
According to the Survey, public procurement at MSP has disproportionately focused on wheat, rice and sugarcane and perhaps even at the expense of other crops such as pulses and oilseeds.
This has resulted in buffer stocks of paddy and wheat to be above the required norms, but also caused frequent price spikes in pulses and edible oils, despite substantial imports of these commodities.
The Survey has stressed on the need for reorienting agriculture price
policies, such that MSPs are matched by public procurement efforts towards crops that better reflect the country’s natural resource scarcities.
The social cost of growing crops like wheat, sugarcane or paddy, are higher when taking account of the negative externalities from using chemical fertiliser (soil depletion and health), water (falling water tables), and from burning crops (adverse health consequences), the Survey said.
Conversely, the social returns to pulse production is higher than the private returns, because it not only uses less water and fertiliser but fixes atmospheric nitrogen naturally and helps keep the soil porous and well aerated because of its deep and extensive root systems, the Survey said.
The Survey has proposed that farmers could be assured a floor price for their crops through a “Price Deficiency Payment”
Under this system if the price in an Agriculture Produce Market Committee (APMC) mandi fell below the MSP then the farmer would be entitled to a maximum of, say, 50 per cent of the difference between the MSP and the market price.
This subsidy could be paid to the farmer via Direct Benefits Transfer (DBT). Such a system would keep the quantum of the subsidy bill in check and also be consistent with India’s obligations to the WTO, the Survey said.