| GS Paper 2 – Agriculture, Government Policies and Interventions |
Context:
The Union Government has recently declared the Minimum Support Price (MSP) for six rabi crops for the 2025-26 marketing season. A significant highlight of this announcement is the increase in the MSP for wheat by ₹150 per quintal, raising it to ₹2,425 per quintal, reflecting a 6.59% hike compared to the previous MSP. This adjustment aims to support farmers and stabilize agricultural markets during the upcoming sowing season.
Minimum Support Price (MSP) Regime in India:
About MSP:
Minimum Support Price is a key market intervention mechanism used by the Government of India to protect farmers from significant drops in the prices of agricultural commodities, especially during periods of surplus production. It serves as a policy tool rather than a legally enforceable right, providing assurance to farmers that they will receive a minimum price for their produce.
Announcement Process:
The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, is responsible for announcing MSP rates. These decisions are based on the recommendations made by the Commission for Agricultural Costs and Prices (CACP), which analyses production costs and market conditions at the start of each sowing season.
Objectives:
- Guarantee to Farmers: Minimum Support Price ensures that farmers receive a minimum assured price for their produce, preventing distress sales during times of low market prices.
- Procurement for Public Distribution: The government procures food grains at MSP to maintain buffer stocks for public distribution schemes.
- Stabilizing Agricultural Markets: Minimum Support Price plays a crucial role in stabilizing agricultural markets, particularly in encouraging domestic production of pulses and reducing dependency on imports.
For instance, when market prices fall below the government-set MSP due to an oversupply, government agencies step in to purchase the entire stock offered by farmers, ensuring that the latter are shielded from potential losses.
Importance of MSP Hikes:
The periodic increases in Minimum Support Price are vital for improving farmers’ welfare by providing them with fair returns. Additionally, these hikes support efforts to stabilize agricultural markets, especially as India seeks to boost domestic production of key crops like pulses in the face of increasing imports.
Historical Background
India’s agriculture sector suffered heavily during British colonial rule, leaving farmers impoverished. In 1957, the Food-Grain Enquiry Committee was set up by Prime Minister Jawaharlal Nehru’s government to address farmers’ earnings. This was followed by the Food Grain Price Committee, formed in 1964 under Prime Minister Lal Bahadur Shastri, which recommended establishing a system of minimum prices.
In 1967, Agriculture Minister Jagjivan Ram announced the first MSP for wheat, marking the beginning of the Minimum Support Price regime. The Agricultural Prices Commission (renamed the CACP in 1985) was then created to help determine MSPs for various crops. The policy was designed to be uniformly applied across India, ensuring that farmers received a fair price for their produce, regardless of market conditions.
Crops Covered Under MSP:
The government sets MSPs for 22 specified crops, along with the Fair and Remunerative Price (FRP) for sugarcane, covering a total of 23 commodities. The crops eligible for Minimum Support Price include:
- Kharif Crops (14 crops) such as rice, maize, and cotton.
- Rabi Crops (6 crops) which include wheat, barley, gram, lentil (masur), rapeseed & mustard, and safflower.
- Additionally, MSPs are announced for two commercial crops.
Challenges Faced by the Minimum Support Price Regime in India:
- Limited Coverage: Minimum Support Price primarily benefits farmers growing the crops covered under the government’s procurement system. Many farmers who cultivate crops outside this list are left exposed to the risks of price volatility, as they do not receive the same protection.
- Regional Disparities: The implementation of Minimum Support Price varies significantly across different states. Some regions with better procurement infrastructure, such as Punjab and Haryana, benefit more from MSP, while others struggle to access it, leading to uneven support for farmers across the country.
- Discouragement of Crop Diversification: The promise of assured prices under Minimum Support Price can make farmers overly dependent on growing specific crops like wheat and rice, leading to overproduction and creating market imbalances. This overreliance may also discourage diversification into other crops.
- Procurement Inefficiencies: Although Minimum Support Price aims to ensure that farmers get fair prices, several challenges hinder its effectiveness. These include delays in payments, lack of adequate storage facilities, and corruption in the procurement process, which prevent farmers from fully benefiting from the scheme.
- Market Distortions: MSP can distort market dynamics, as farmers might prioritize crops covered under Minimum Support Price, rather than responding to actual market demand. This often leads to surpluses in some crops and wastage, while other essential crops remain underproduced.
- Neglect of Non-Cereal Crops: The Minimum Support Price regime has traditionally focused on staple crops such as wheat and rice, often sidelining pulses, oilseeds, and other crops critical for nutritional diversity and food security. This imbalance can affect the availability of these essential crops in the market.
- Inflationary Pressures: Raising MSPs without corresponding improvements in agricultural productivity can lead to inflation, particularly in food prices. This can adversely affect consumers and put pressure on the broader economy.
- Sustainability Concerns: The heavy focus on certain crops, especially water-intensive ones like rice, may lead to unsustainable farming practices. This includes the overuse of water and the degradation of soil health, posing a threat to the long-term viability of agriculture.
- Lack of Awareness Among Farmers: Many farmers are unaware of the MSP policies or do not fully understand how to access government support. This lack of knowledge leads to underutilization of the benefits provided under Minimum Support Price.
- Political Interference: Decisions regarding MSP are sometimes influenced by political factors, rather than being strictly based on economic considerations. This can result in inconsistent pricing and procurement policies that do not align with the actual needs of the agricultural sector.
The callenges surrounding the MSP regime highlight the need for a more inclusive and efficient system to ensure that all farmers, regardless of region or crop type, benefit equally from government support. Addressing these issues is crucial for ensuring sustainable agricultural development and enhancing food security in India.
Explore our Books: https://apnipathshala.com/product-category/books/
Explore Our test Series: https://tests.apnipathshala.com/
