Making MSP legal obligation can create complexities, warns agricultural economist Ashok Gulati

The MSP serves as the baseline price established by the government for purchasing crops from farmers.

Ashok Gulati, an eminent agricultural economist and professor at the Indian Council for Research on International Economic Relations (ICRIER), has weighed in on the pressing issue of farmers' demand for legislation on Minimum Support Price (MSP) and its potential implications. In an interview with the news agency ANI, he expressed his views, stating, "The establishment of MSP as a legal obligation may introduce complexities... A more prudent approach might involve mitigating market risks for farmers."

The distinguished economist advocated for an approach that provides farmers with protection against market risks, suggesting the creation of a price stabilisation fund, wherein, if prices fall below the MSP, the government intervenes by procuring a portion of the produce to ensure farmers receive a fair price. This, he argued, would offer more robust support to the farming community.

Also Read | What is minimum support price, or MSP? Is legalising MSP a cure for India's agriculture problem?

Punjab's Delayed Diversification Imperils Future Generations

Gulati emphasised that Punjab's delay in pursuing diversification efforts by at least two decades poses a threat to future generations. The drastic decline in the water table, shrinking by over a meter annually, highlights the urgent necessity for diversification initiatives. He lamented that Punjab's leadership has failed to adequately address this critical concern, worsening the situation.

A Safety Net for Farmers Amid Market Volatility

The MSP serves as the baseline price established by the government for purchasing crops from farmers. Announced every season, these rates ensure farmers receive fair compensation for their produce, thereby fostering greater investment and productivity in agriculture.

The pricing mechanism works as a vital safety net for farmers, ensuring they receive equitable price for their crops, especially during periods of market volatility or when market prices fall below the MSP.

Also Read | MSP can be legalised, but at crippling cost to economy, environment

Paddy, Wheat Farmers Get Rs 18 Lakh Crore in MSP Over Past Decade

During her inaugural address to a joint session of Parliament in the newly constructed building last month, President Droupadi Murmu highlighted that paddy and wheat farmers have collectively received nearly Rs 18 lakh crore over the past decade under the MSP regime—a substantial increase of 2.5 times compared to the preceding decade before 2014.

Additionally, she emphasised that farmers engaged in oilseed and pulse cultivation have received more than Rs 1.25 lakh crore in MSP support over the past decade under the current administration.

Experts Advocate Flexible Strategies to Safeguard Farm Incomes

Farmers are seeking economic stability and protection from the volatile fluctuations in agriculture, which often result in losses and indebtedness. However, many experts caution against implementing a law mandating minimum support prices, viewing it as a potentially harmful measure. They, however, suggested that India should devise a strategy to safeguard farm incomes without rigidly establishing fixed price structures.

At present, the government disburses Rs 6,000 annually to eligible farmers under the PM-KISAN scheme. To address agricultural challenges more comprehensively, the central government may consider expanding the programme's coverage to include a wider range of landholdings.

Govt May Need Rs 6 Lakh Crore Working Capital to Procure Entire MSP Crop Output

CRISIL's analysis indicates that if the government were to procure the entire output of the 23 crops for which MSP has been announced, it would require a working capital of nearly Rs 6 lakh crore during the current marketing season. This projection is based on the assumption of procuring crops that are exclusively trading below the MSP in mandis. However, the actual expense to the exchequer, considering the differential between MSP and mandi prices, is projected to be around Rs 21,000 crore for the 2023-24 marketing season.