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The ongoing protests over legalising the Minimum Support Price (MSP) have brought attention to the challenge of determining a fair price for farmers’ produce.
While the government currently provides MSP for 23 crops, the remuneration is not enough to make farming profitable.
Agriculture and market experts suggest that the Commission for Agricultural Costs and Prices must rethink how it measures the cost of agricultural produce in order to ensure a fair price to farmers without worsening the already rising food inflation. They also emphasise the need to align MSP with the country's macroeconomic goals and climate variations.
Devinder Sharma, food and agricultural policy expert, told Down To Earth (DTE) that Indian farming should be made profitable. Below is a summary of what he told DTE:
The ongoing debate on legalising Minimum Support Price (MSP) has drawn focus on calculating the right price for farmers’ produce. At a time when farm incomes are at their lowest, the latest “Situational Assessment Survey for Agricultural Households” by the National Sample Survey Office (NSSO) estimates average household income at Rs 10,218 per month. This figure, which includes income from non-farm activities, clearly indicates how unrewarding farming has become.
While farmers are demanding that MSP become a legally binding benchmark price below which no trading takes place, the bigger question is whether the Commission for Agricultural Costs and Prices (CACP) that determines the prices for 23 crops every year, is making a correct evaluation. Although the cost of production is the primary factor in determining MSP, the manner in which the cost is worked out itself has been questioned. In addition, the terms of reference for cost calculation include likely implications for consumers, terms of trade between agriculture and non-agriculture, international price competitiveness and inter-crop price parity. This lowers the final MSP. In other words, to keep consumers happy, food prices are deliberately kept low. In reality, it is the farmers who end up bearing the cost.
A study by the Organisation for Economic Cooperation and Development (OECD), the world’s richest trading bloc, reveals that Indian farmers have been incurring continuous losses since 2000. Analysing producer subsidy support in 54 major economies, the study concludes that India is the only country where farm losses are not covered by budgetary support or by way of a remunerative price. Given that MSP currently benefits only 14 per cent of the farmers, it becomes imperative as a first step to expand its reach to all farmers and all crops.
Even when MSP is legalised, not more than 50 per cent farmers will stand to benefit. With agricultural holdings getting smaller, a sizeable farm population will not have any marketable surplus. This section, which includes small, marginal and landless farmers, will also need economic protection in the form of direct income support.
The time has come to set up a Commission for Farmers Income and Welfare (co-opting CACP) to enhance the financial well-being of farmers. It should have the mandate to bring about parity with other sections of society and make farming a profitable enterprise.
This was first published in the 1-15 August, 2024 print edition of Down To Earth