What is Minimum Support Price (MSP)?

A steady worth setting is taken under consideration vital to boost agricultural manufacturing. to hold that about, a central authorities physique, Commission for Agricultural Costs & Prices (CACP), recommends MSP for 23 commodities. MSP is decided on the thought of seven standards, of which price of producing may be a very powerful.

MSP is a component of the bundle to form sure meals safety and maintain sufficient meals shares within the general public distribution system. After harvest, the Centre’s Food Corporation of India (FCI) procures commodities at MSP to be used within the PDS.

In follow, MSP and procurement are efficient for less than two commodities, paddy and wheat.

Do all farmers get to market at MSP?
No. Barely 12% of paddy growers, as an example, take advantage of procurement at MSP. this is often as a results of the effort put in by state governments influences the place the grain is procured. the ultimate mile aggregation is usually finished by state governments. Where they’ve been profitable, the farmers profit extra. But the Centre picks up the invoice for the procurement.

In Punjab, greater than 95% of paddy growers take advantage of MSP, whereas in UP solely 3.6% of farmers profit.

What are Agricultural Produce Marketing Committees (APMCs)?
They are bodily markets regulated by respective state governments under the APMC Act. These legislations won’t be uniform throughout states. The Centre advised the Lok Sabha in March 2017 that India has 6,630 APMCs. On a mean, one APMC serves a geographical space of 496 sq km. Typically, it’s solely shares dropped at APMCs and different designated buy centers which are procured at MSP.

Does MSP make a distinction to the farmer?
In the case of paddy, the common market worth of paddy remained beneath MSP for the final 5 seasons. In the case of wheat, there was much more convergence of market worth and MSP. CACP knowledge nonetheless reveals that the place MSP works, like Punjab, market worth is normally consistent with it. Where procurement at MSP is restricted, like UP and West Bengal, the market worth on most days is beneath MSP.

Where the procurement system works nicely, it appears to favour all farmers because the market worth and MSP largely converge.

What are the new central farm laws?

It’s a bundle, which dilutes important commodities rules, helps contract farming and gives for organizing new agricultural markets under central laws as competitors to APMCs.

The final half, which fits under the title Farmers’ Produce Trade and Commerce (Promotion & Facilitation) Act, is the one, which has triggered nervousness. It creates a wholly new market house with virtually no entry limitations for merchants. But extra importantly, it doesn’t present for taxes or levies on transactions.

Why shouldn’t farmers welcome competitors?
To return to the MSP system, it really works nicely the place states have made the effort. They normally levy taxes on the procurement, which will be wont to offer infrastructure. Punjab and Haryana, as an example, levy a standalone rural growth price of three and a pincer respectively. The fear comes from the likelihood that if there are two markets shopping for the identical commodities however just one of them levies a tax, commerce will inevitably shift to the one and not using a tax.

The fear seems to be that states with out sufficient tax income or assets may be disinclined to maintain the present MSP system going.

For different merchandise like fruit and veggies, most states had earlier eliminated the authorized monopoly APMCs initially had. By 2019, 17 states had eliminated fruit and veggies’ monopoly from APMCs and 19 had provisioned contract farming into their respective APMC Acts.

If MSPs have led to environmental injury in Punjab and Haryana and pushed down water tables, why don’t farmers swap to different crops?
The collateral injury of the present system is extensively acknowledged, together with by the farmers. The reluctance to shift bent a way less useful resource intensive cereal like maize is as a results of the prices won’t be remunerative. CACP admits farmers in Punjab and Haryana don’t have an incentive to change.

The lure of the present MSP system for farmers is finest introduced out by the developments in Madhya Pradesh, the rising star within the procurement system. In MP, the state authorities carry out procurement of wheat and paddy. This yr, MP surpassed Punjab in wheat procurement, topping the checklist. More importantly, in simply two years, wheat procurement at MSP within the state has elevated from 46% of complete manufacturing to 70% of manufacturing.

Other states have joined the bandwagon. In 2018-19, 9.7 million farmers benefitted from paddy procurement at MSP, a rise of 34.2% in a yr. Most of the new beneficiaries had been from states corresponding to Chhattisgarh, Telangana, UP and West Bengal.