Introduction:
In response to consecutive droughts in 2014-15 and 2015-16, the government aimed to double farmers’ incomes by 2022-23, as outlined by the Ashok Dalwai Committee’s seven-year plan beginning in 2015-16. Aiming for a 10.4% annual growth rate was considered essential to achieve this ambitious goal.
Body:
MSP as a Remunerative Tool:
- Income Stability: The Minimum Support Price (MSP) serves as a crucial tool in establishing a minimum price floor, ensuring a guaranteed income for farmers regardless of market fluctuations. By preventing significant drops in agricultural commodity prices, MSP contributes to income stability.
- Risk Mitigation: As farmers face various risks such as unpredictable weather and pest infestations, MSP acts as a risk mitigation tool, providing a safety net.
- Encouraging Crop Diversification: Attractive MSPs for specific crops, like pulses, incentivize farmers to diversify their cultivation, reducing the risks associated with monoculture.
- Investment in Quality Inputs: The assurance of a remunerative price motivates farmers to invest in quality seeds, fertilizers, and technology, thereby enhancing overall productivity.
- Government Procurement: Government agencies, such as the Food Corporation of India (FCI), procure rice and wheat directly from farmers at MSP, ensuring a direct market for their produce.
Alignment with Economic Goals:
- Doubling Farmers’ Income: The Union Budget allocated over Rs 3.70 lakh crore for various subsidies, including MSP, in the fiscal year 2021-22, highlighting its pivotal role in the economic strategy.
- Positive Impact on Income: According to the Situation Assessment Survey (SAS) of agricultural households (2022-2021), the average monthly income of an agricultural household was Rs 10,218, underscoring the economic significance of farming.
- Incentive for Crop Diversification: States with a robust MSP system, like Punjab, witness diversification into high-value crops, aligning with the economic goal of doubling income.
- Role in Modern Agricultural Practices: Adoption of MSP correlates with technology-intensive agriculture, leading to improved productivity in states like Haryana and Punjab.
- Market-Oriented Agriculture: Schemes like the electronic National Agriculture Market (e-NAM) aim to link farmers directly with markets, promoting market-oriented agriculture.
- Contributing to Rural Economy: Successful MSP implementation positively impacts rural economic indicators in states like Maharashtra and Haryana, leading to increased income and employment.
Criticism & Challenges of MSP:
- No MSP for Allied Sector: The absence of MSP for animal husbandry and fisheries hinders income augmentation from these sectors, lacking government procurement.
- Demand-Driven Outside APMC Mandis: MSP, being demand-driven, operates largely outside APMC mandis, affecting market dynamics.
- Inadequate Storage System: Continuous MSP hikes for grains face challenges due to overflowing government grain stocks, exceeding buffer stocking norms.
- MSPs Favouring Paddy and Wheat: Dominance of MSP in rice and wheat production leads to overproduction, discouraging cultivation of crops with higher demand.
- Economically Unsustainable: The economic cost of procured rice and wheat exceeds market prices, burdening FCI with an unsustainable economic burden of Rs 3 lakh crore.
- Market-Driven Non-Farm Sector: Milk and poultry, lacking MSP, have pricing determined by companies and milk federations, promoting growth compared to grain-dominated sectors.
- Export Restrictions: Surplus grains, subsidized due to MSP, face WTO restrictions, resulting in significant wastage annually. Loopholes in MSP Implementation: The Shanta Kumar Committee reveals that only 6% of MSP reaches farmers, leaving 94% deprived.
Way Forward:
- Invest in the Agri-Allied Sector: Prioritize investment in animal husbandry, fisheries, and fruits/vegetables for a more nutritious and diverse agricultural landscape.
- Strengthen FPOs: Enhance Farmer’s Producer Organisations (FPOs) to bolster farmers’ bargaining power and create a conducive investment climate.
- Increase Farmer Awareness: Disseminate information at grassroots levels to empower farmers with knowledge and enhance their bargaining capacity.
- Ensure Timely Payments: Address delays in payment to farmers to maintain sustainability in farming, ensuring prompt and remunerative payments.
- Promote Irrigation: Invest in irrigation to stabilize state agri-GDP growth, especially in regions with lower irrigation coverage, ensuring a more stable income for farmers.
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