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.
T N Prakash Kammardi, former chairperson, Karnataka Agricultural Prices Commission, told Down To Earth (DTE) that ‘One MSP, One Nation’ is unfit for a country as diverse as India. Below is a summary of what he told DTE:
Farmers often struggle to secure fair prices for their produce because of limited bargaining power. To address this, there is a growing demand for legal action to ensure MSP that is gaining prominence in political circles, especially during elections. This situation necessitates a deeper examination of MSP’s operational aspects, particularly reconsidering the suitability of a single MSP given India's diverse agricultural landscape.
Agricultural practices vary significantly across agro-ecological regions and holding categories, with different access to water resources, soil properties, microclimatic conditions and local pressures influencing crop yield. Implementing a single MSP based on a uniform nationwide cost and return structure raises concerns about equity.
For instance, paddy, predominantly cultivated under assured irrigation, shows a significant yield disparity among major producing states. Punjab, with the highest yield of 70 quintals per hectare (ha) and low production cost (Rs 864 per quintal), sees a high return of 153 per cent against the current MSP. In contrast, other states experience low or negative returns because of higher costs and lower MSPs than those projected by CACP. Profit margins over A2 (production cost of a farmer) + FL (the value of family labour) cost often fall below 50 per cent in many states, even turning negative in Maharashtra.
Paddy grown under rainfed conditions highlights the disparities. The Karnataka Agricultural Prices Commission (KAPC) notes that paddy under assured irrigation yields 145 per cent more than rainfed cultivation. This results in a significant cost disadvantage for rainfed farmers, with production cost at Rs 2,368 per quintal compared to Rs 1,306 per quintal for irrigated cultivation. A uniform MSP of Rs 1,960 per quintal (in 2021-22) for both methods impacts dryland farmers' incomes.
Irrigated crops like paddy are more profitable than dryland crops like pulses and oilseeds. Dryland crop profitability is notably lower, with ragi at 10 per cent, jowar at 37 per cent and Sesamum at 38 per cent, according to CACP data.
Modern farming’s pursuit of increased productivity relies heavily on agrochemicals and diesel fuel. Irrigated paddy, for example, uses 34 per cent of its comprehensive cost (C2) on external inputs, compared to 7-15 per cent for dryland crops. Irrigated paddy requires 1,207 kg of agrochemicals per ha, nearly 3.6 times more than rainfed paddy. The overuse of agrochemicals negatively impacts soil health, water ecosystems and food systems.
So, establishing a state-specific decentralised MSP mechanism that guarantees a profit margin of at least 50 per cent over cost, prioritising rainfed crops like millets, pulses, and oilseeds, is imperative. This approach would ensure food, fodder, and nutritional security for the country.
This was first published in the 1-15 August, 2024 print edition of Down To Earth