MSP and Farmer Concerns

Why in news?

• Centre announced the ‘Minimum Support Price’ (MSP) for the oncoming rabi season.
• Price incentives for farmers should be followed up by better marketing infrastructure.

What has been MSP impact recently?

• Current MSP rates saw a small increment for cereals, while promoting a shift towards pulses and oilseeds.
• Increases have moderated since 2013 - cereals have seen an increase of merely 6-7% while pulses have been higher at 8-10%.
• Consistent emphasis on pulses has translated into improvements in acreage and output.
• 158 lakh hectares has been brought under rabi pulses in 2016-17, against 142 lakh hectares in the previous year.
• The acreage under Gram (chana) - the principal rabi pulses crop, increase by 10% and accounted for 98 lakh hectares in 2016-17.
• All this saw the production of record output of nearly 23 million tonnes of pulses.

What are the problems?

• While MSP can increase out and also change cropping patterns, it cannot work wonders in isolation.
• The meagre MSP rise has evoked an angry response from farmer organisations, who claim that even cost recovery is a challenge. 
• Also, the delays in government procurements has been a point of concern alongside a lacklusture private marketing infrastructure.

How does the future look?

• Economic Survey 2016-17 has suggested a shift towards controlling input prices through ‘Direct Benefits Transfer’ instead of MSPs.
• While streamlining subsidy deliveries, the need for farmers to live with dignity and income security should not be overlooked.
• Augumenting Prices - NITI Aayog’s has suggested a ‘Price Deficiency Payment Mechanism’.
• The proposal is to just transefer funds to farmers to bridge the gap when market prices fall below MSP instead of procuring directly.
• This is fraught with implementation issues and runs the intrinsic risk of trader misuse.
• Market Infrastructure - Supplementing government initiatives with better private marketing infrastructure is critical.
• Increasing the number of mandis (estimated at 7,700 currently) is to be considered for enabling a better price discovery.

Source: Businessline