Is farmers’ demand for MSP justified?

Farmers from Punjab are unwilling to relent on their demand for a legal guarantee to MSP for all crops and have threatened to march to Delhi. The question is: is this demand justified?

Farmer leaders from Punjab on Monday rejected the latest offer from the central government on guaranteeing floor prices for select crops, and announced that they will resume their march to the national Capital. This announcement has led to police in Haryana and Delhi sealing off key borders for days now, which means people in the national capital region (NCR) will face harrowing time for some more days. Union ministers held a fourth round of talks with the two outfits leading the agitation – Punjab Kisan Mazdoor Sangharsh Committee (KSMC) and Bharatiya Kisan Union (Ekta Sidhupur) – in Chandigarh till early hours of Feb. 19. The government offered a new mechanism – five-year contracts with cooperative societies to procure pulses, maize and cotton at minimum support prices (MSP) – but leaders of the two unions announced at the Shambhu border between Punjab and Haryana, where a caravan of thousands of farmers initially headed to Delhi on Feb. 13 has halted, that the offer was rejected. “The Centre’s proposal of MSP on three pulses, maize and cotton through cooperatives, is not in our favour,” they said, announcing to resume their ‘Dilli Chalo’ protest on Feb. 21 to demand legal guarantee of MSP on all crops.

Kisan Mazdoor Sangharsh Committee general secretary Sarvan Singh Pandher said: “We will start marching towards Delhi. We should be allowed to protest. We have every right to launch an agitation. There is no need for any meeting. The government should take decisions now. There have been enough discussions.” 

“We appeal to the government to either accept our demands or let us go to Delhi,” he said, adding that the protesting farmers did not want to break the barricades. “But nobody listens to us. We have been trying not to cause harm to anyone…. We do not want anyone to lose his life. But this government is not listening…” He alleged that the government’s intent was questionable. “The Union ministers kept telling us inside the meeting that the proposal was for all the farmers across the country. But after they came out, they started saying that only those farmers would get MSP on pulses, maize and cotton, who will diversify from paddy,” he claimed, referring to the fourth round of talks in Chandigarh on Sunday to find a resolution.

Commerce and Industry Minister Piyush Goyal, Agriculture Minister Arjun Munda and Minister of State for Home Affairs Nityanand Rai participated in the meeting with the farmer leaders in which Punjab Chief Minister Bhagwant Mann was also present. Farmer leaders said the panel of ministers told them that the MSP on pulses alone will cost the government Rs 1.5 lakh crore. “We have calculations from experts who say that the MSP on all 23 crops will cost the exchequer Rs 1.75 lakh crore. We spend Rs 1.75 lakh crore on palm oil imports. The palm oil is already responsible for so many diseases in the country. If the government announces MSP on oil seeds, then Rs 1.75 lakh crore can be saved on these imports,” the farmer leaders added. 

Before we discuss the justification for the farmers’ demand, let’s understand the history of MSP. MSP is a byproduct of the Green Revolution, which was aimed at making India self-sufficient for its food demands. It was introduced, by an executive order, in 1966 to offer a minimum support price for wheat as an incentive to farmers to grow more grains so that India doesn’t need to import wheat. By the 1980s, the country became self-dependent for food, and today we are a net exporting country as far as food production is concerned. MSP is offered on seven types of cereals (including paddy and wheat), five types of pulses (gram, arhar, moong, urad and masur), eight types of oilseeds and two types of commercial crops (jute and sugarcane). For sugarcane, the MSP is called fair and remunerative price. The Commission for Agricultural Costs & Prices (CACP), under the Ministry of Agriculture and Farmers Welfare, recommends MSP for Rabi and Kharif crops, and the Cabinet Committee on Economic Affairs announces it. There is no MSP on vegetables, fruits, dairy products, flowers and fishery products. 

The Green Revolution spawned prosperity in Punjab, Haryana and western Uttar Pradesh, the areas which had irrigation facilities. As farmers in these areas grew more and more wheat and paddy, the government procured their produce at MSP for distribution under the public distribution system (PDS) through fair price shops, also known as ration shops. According to reports, 88% of paddy and 70% of wheat in Punjab and Haryana is procured on MSP. Of the all India procurement, 62% of wheat and 35% of paddy comes from these two states. This means that the agriculture economy of these two states is heavily dependent on government procurement on MSP. That is the reason that all protests – the earlier one against three farm laws and this one for legal guarantee on MSP – are by farmers in these two states. One would seldom see a farmer from West Bengal or any of the southern states participating in these protests because other farmers don’t reap the benefits of MSP. As a matter of fact, only 6% farmers benefit from MSP. In that sense, the demand for a legal guarantee on MSP may sound like a justifiable demand, but that is not the case. 

The National Farmers’ Commission led by MS Swaminathan, who was recently given the Bharat Ratna by the President, recommended three formula for calculating MSP – A-2 (input cost, which means cost of seeds, fertilizers and transportation); A-2+FL (family labour); C-2 (A2+FL+land rent, which is opportunity cost on the land under cultivation). Farmers are demanding ‘C2 plus 50 per cent’ formula for MSP. 

In fact, MSP was introduced to incentivize farmers to grow more grains. Now that the country is a net exporting nation, should this continue? What is the logic? No other business in India gets a guarantee that its produce will not be sold at a price lower than the minimum support price. Secondly, MSP was introduced by an executive order, and it continues to be announced year after year since 1966. Why do farmers now want a legal guarantee on it?

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