Farmers Denied Rs 1,900 Crore Due to Sales Below MSP in Last Two Months

The Wire's analysis reinforces the fact that the announcement of MSP for most crops remains mostly on paper as farmers are rarely able to sell it for these prices.

New Delhi: If the government’s minium support price (MSP) programme helped in properly creating a minimum floor price, farmers across 11 major agricultural states would have, on average, earned almost Rs 1,900 crore more by selling their produce.

According to The Wire’s analysis of data from Agmarknet – the government’s price information system, which sources price and quantity arrival data from around 3,000 wholesale mandis across the country – farmers on average were denied at least Rs 1,881 crore by having to sell their produce below the MSP in October and November.

The most sizeable ‘losses’ were in the sale of maize. Prices were hovering between Rs 1,100 and Rs 1,550 a quintal – as against the MSP of Rs 1,850, and the total income denied to farmers in October and November was a staggering Rs 485 crore.

For groundnut, due to sales below the MSP, farmers suffered notional losses to the tune of Rs 333 crore.

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Even for paddy, sales below the MSP meant that in some major producing states – other than Punjab and Haryana – the total loss of income was Rs 220 crore. In all other major paddy producing states – Chhattisgarh, Uttar Pradesh and Telangana – the average prices were 15% below the MSP.

For the analysis, we used the weighted average monthly prices of crops at the state level and the quantity sold state wise available at Agmarknet.

The difference between the monthly average price in each state and the MSP was multiplied by the quantity sold in each state to arrive at the notional loss or profit figure for each crop in each state.

To arrive at the figure of the total notional loss, we only considered those crops in those states where the average prices were below the MSP as that would be a more accurate representation of losses suffered due to sales made below the MSP.

If we account for the gains made in some crops in some states – essentially paddy in Punjab and Haryana – Rs 1,400 crore is the net notional loss over the two month period. We only considered states where 95% or more of the produce of the crop in question was sold. As a result, our projection of losses is likely to be an underestimate.

Finally, it is important to remember that the data we have used relies on the Agmarknet system, which provides prices and quantities for transactions inside mandis. A substantial portion of transactions also take place outside the mandi, where the price that the farmer gets is likely to be even lower because the transaction cost incurred by the trader to reach the farmer would have to be factored in.

Farmers gather in large numbers during their ‘Delhi Chalo’ protest march against the new farm laws, at Kundli border in Sonipat, December 2, 2020. Photo: PTI

Sale remains below MSP

One of the key demands of the ongoing farmers’ agitation is that the MSP should be made a legal right. The reason for this demand is that even though the MSP is declared for 23 crops, most of them are usually sold at much lower rates. It is mainly two crops – paddy and wheat – that actually sell at or above MSP and even this is usually found to be the case in Punjab and Haryana. And that is also why farmers of these two states stand to lose the most if indeed procurement at the MSP is curtailed.

Our analysis only reinforces what is well known. That the announcement of MSP for most crops remains mostly on paper and in the absence of effective procurement – which is at its best in Haryana and Punjab – farmers are rarely able to demand prices which are at par or above MSP.

For instance, the average price of Bajra in Karnataka was 45% below the MSP in October and 42% below the MSP in November.

Jowar in Madhya Pradesh sold at 56% lower than the MSP in October and 33% below the MSP in November.

Also Read: Interview: ‘A Level-Playing Field for Farmers Can Only Come Through an MSP Regime’

Average state level prices were substantially higher than the MSP for the little procured seasamum. The prices of Urad were around 10% higher than the MSP in both October and November in Maharashtra and Karnataka.

The price of Arhar also started rising in November, but at around Rs 1,000 a quintal in Maharashtra and Karnataka, continued to be lower than the MSP in Madhya Pradesh – where a bulk of the procurement happens.

Other than these crops, only paddy in Punjab and Haryana sold at average prices higher than the MSP in October and November (around 1% higher).

At the state level, the total net notional loss was the highest in Karnataka at Rs 403 crore. Prices for maize, soybean, groundnut, moong, bajra, cotton, jowar, ragi and paddy were below the MSP in both the months. While the price of Arhar was higher than the MSP in both the months, Karnataka is a marginal player in the procurement of the pulse and did not alter the overall scenario by much.

Karnataka is a major player in maize and saw the highest arrivals of the crop in the country in October and November combined. But farmers suffered a loss of Rs 130 crore in the crop as the average price was 21% below the MSP in October and 16% below the MSP in November. Soybean farmers also suffered in the state and registered losses to the tune of Rs 82 crore.

In Madhya Pradesh, the average prices were well below the MSP for maize, cotton, soybean, arhar, jowar and groundnut. In fact, for maize – whose prices have suffered this year across the country, partly due to the decimation of the poultry industry – prices were 39% and 29% below the MSP for October and November respectively.

Farmers in Gujarat saw losses in excess of Rs 100 crore each in groundnut and cotton for the two months. The western state saw the highest arrivals of both these crops in the country.

The only states with net gains over the two month period were Haryana and Punjab where procurement for paddy, as we mentioned before, is effective with adequate infrastructure in place. However, even in Punjab, farmers selling maize and cotton had to sell their produce below the MSP.