MSP A2+FL
Union Cabinet cleared 2018-19 kharif Minimum Support Prices (MSP) - MSPs at 1.5 times the cost of production - MSPs at least 50 per cent above the sum of cost of production (A2) + imputed wages for the time spent by the farmer and his/her family (FL) in crop production
meet the spirit -
Swaminathan Committee recommendation of 50% net return over Cost C2
Impact
reversing - trend - food inflation having fallen steadily from 11.8% in FY13 to 1.8% in FY18
beyond some point - market distorting as it severs link between prices and demand-supply
Actual procurement will be limited by the fiscal room available
Farmers - negative returns in several crops | economists - question the usefulness of MSP’s
cost of cultivation varies across states - MSP’s are based on a weighted all India average - failed to keep pace with input costs
few states - Punjab, MP, Haryana - developed procurement infrastructure
MSP - benefiting - large traders than farmers - More than three fourths of farming households don’t produce - marketable surplus
no provision - budget to increase the ambit of farmer swho are covered by MSP
MSP - only announced - 25 crops, other crops - deal with market volatility
| no MSP - fruits and vegetables
fraction farmers actually have access to MSP | government does not procure on time | farmer - distress sales at rates lower < MSP
producing the same varieties - cropping pattern hardly changed
India’s price support programme- promoting cultivation of water intensive crops - paddy and sugarcane - water deficit regions - Punjab ,Haryana and Maharashtra
Higher MSP’s over incentivize production - supply glut
MSP increase will help?
adverse conditions - prices and operating conditions - farm sector | key component of the prime minister’s goal - doubling farm incomes by 2022
Incentivise production - specific food crop - in short supply
Protects farmers from any sharp fall in the market price
Ensures - country’s agricultural output responds to the changing needs of its consumers | Ex: government hiked - MSP - pulses to expand sowing of pulses.
Higher farm profits will encourage farmers to spend more on inputs, technology
Protect - unwarranted fluctuation in prices, provoked - international level price variations.
Way forward
NITI Aayog - reforms in the APMC Act + tenancy laws + tweaks - eNAM (electronic National Agriculture Market).
suggested ‘Price Deficiency Payment’ system to address the gaps in Minimum Support Price (MSP) based procurement of crop | compensated for the difference between - government-announced MSPs for select crops and actual market prices
PDP - reduce need for the government to actually procure food crops, transport - store - dispose - under PDS | keep India’s bill on food subsidies under
check - Niti Aayog
crops - rice and wheat - MSP announcements continue | For other targeted crops - price deficiency payments
allow agro trading companies to buy more in the Indian market - the limitations of the Food Corporation of India
increased investment - irrigation and post harvest infrastructure
Telangana experience - payment of Rs.10000 per hectare of cultivable land to all farmers irrespective of the crops they raise
ambitious projects - e-NAM, doubling farmer’s income by 2022, price stabilization fund, implementation of Swaminathan and Shanta Kumar committee - required
double the real incomes of Indian farmers - halve their numbers through job creation in other parts of the economy.