Why the Farmers' Demand to Legalise MSP is Justified

While the farmers' demand for legalising MSP is being questioned for the allegedly hefty expenditure the government would have to incur, the potential sundry benefits it would have for the agricultural sector in general outweigh the costs.

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Chandigarh: Despite Prime Minister Narendra Modi’s announcement accepting the protesting farmers’ key demand – repeal of the three farm laws – farmers’ unions have said their protest will continue until their six remaining demands, including the legal mandate for minimum support prices (MSP), are met.

“It (MSP) is important because all farmers are assured at least the minimum price for their produce,” said the Sanyukt Kisan Morcha (SKM) in its recent open letter to the PM.

As the name suggests, MSP is the minimum price a farmer must be paid for their food grains as guaranteed by the government. The big problem with the MSP system, however, has been that it was never backed by a parliamentary act and therefore, could never be legally enforced across India.

“It was introduced in an executive order in the 1960s, basically as an incentive to farmers in areas like Punjab and Haryana, which were zeroed in on by the then Union government to grow mainly wheat and paddy in order to overcome the food shortage; an event later tagged as the ‘green revolution’,” said economist Lakhwinder Singh.

Over the years, the Union government went on to announce MSPs for as many as 23 crops, but the actual procurement by the government remained confined to mainly wheat and paddy, that too in the northern states, which became the cradle of the green revolution and continue to serve the nation with the same vigour, Singh added.

In this light, Singh continued, the farmers’ demand to legalise MSP is justified since they can’t be left at the mercy of market forces; something the now-repealed farm laws were supposed to achieve but were sunk due to the exemplary struggle by the farmers.

Ever since the Modi government decided to repeal the laws and the major focus of the movement shifted to the legalisation of the MSP regime, several voices have emerged, both in academia and the mainstream media listing out the consequences of legalising MSP.

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Of the 23 crops that the government currently announces MSPs for every year, there are seven cereals (paddy, wheat, maize, bajra, jowar, ragi and barley), five pulses (chana, arhar, moong, urad and masur), seven oilseeds (groundnut, soybean, rapeseed-mustard, sesame, sunflower, niger seed and safflower) and four commercial crops (sugarcane, cotton, copra and jute.)

Legalising MSP would put the government under a legal obligation to buy every grain of the crops for which MSPs are announced. For this, the Union government will have to spend Rs 17 lakh crore, according to the rough estimate from government officials which was shared during the talks between the government and farm unions last year.

Representative image: While the government currently announces MSPs for 23 crops, it largely only procures wheat and paddy. Photo: Reuters/Amr Abdallah Dalsh/File Photo

Apart from expenditure required to procure the crops, the government will have to spend a huge amount of money to create the facilities required to store the procured grain.

Another argument against the farmers’ demand is that if the Union government makes MSP a legal mandate to ensure that private players or government agencies buy the crops at least at the fixed price anywhere in the country, there will be a price rise and increased inflation in general.

Anil Ghanwat, a member of the Supreme Court panel to study the farm laws, has been quoted by various media outlets as saying that the demand to legally guarantee MSP for all 23 crops would make whoever procures the crops, Union or state governments, bankrupt.

 “All the revenue will be diverted toward this and there will be no money left with the government to develop and maintain essential things like roads, bridges and so on. If MSP is made legal for the 23 crops, soon, other farmers will also come up with the demand for their crops such as fruits and vegetables,” he said.

“Due to the existing MSP regime, the government procures 110 lakh tonnes of wheat and paddy, even though it has a buffer stock norm of just 41 lakh tonnes. The rate of procurement and the stock is also bulging up in the case of all other crops among the 23 MSP ones,” Ghanwat added.

However Sukhpal Singh, principal economist of the Punjab Agriculture University, Ludhiana, told The Wire that the Rs 17 lakh crore procurement estimate for the 23 crops at current MSPs is faulty.

“My estimate suggests that the government does not need more than Rs 9 Lakh crore to procure every grain of the 23 crops currently under the MSP regime,” he said.

“Further, we have to keep in mind that the entire produce of the farmers does not come to the mandis. The farmers hold back part of their produce for their own personal consumption as well as for seed and cattle purposes,” he said

“For instance, not more than 74% of the total wheat production enters the market for sale. It is 90% in case of paddy. The figure varies for other crops as well. Hence, the total procurement value of all 23 crops that actually enter the market is not more than Rs 7 Lakh crore,” he added. “Whatever the cost factor, public investment cannot just be seen as mere expenditure. It generates employment, raises incomes and drives the economy. The industrial sector is too mechanised to absorb people uprooted from rural India. It is, therefore, vital that more and more people are not displaced from agriculture.”

“MSP is, therefore, not a government sop. It is the bare minimum for saving the peasantry from devastation and destitution. It is an insurance against the anarchy of the future,” Sukhpal Singh said.

Watch: What Do Farmers Have to Say to the Section of Media Which Vilified Them?

‘$5-trillion economy not possible without the welfare of farmers’

Backing the farmers’ demand for legalised MSP, Chaudhary Birender Singh, senior BJP leader and grandson of iconic farm leader Sir Chottu Ram, told The Wire that India can’t achieve a $5-trillion economy by ignoring its farmers. He said that a few months ago, a farmer leader from the SKM had also agreed to the fact that it was difficult for any government to buy every grain at MSP.

“The issue here is to prevent the distress sales of the farmer and to give him an adequate return on his crops. The best way to deal with it is to make MSP a yardstick or a benchmark below which no one, be it the government or the private sector, should be allowed to procure the farmers’ produce,” he said.

BJP leader Chaudhary Birender Singh. Photo: PTI.

Ever since the process of liberalisation began in India in the 1990s, he continued, the income of the farmers has been affected massively for various reasons.  Therefore, it is very important to make sure that their welfare is taken care of in a proper manner and a mechanism is developed to increase their incomes and make agriculture reasonably profitable.

Birender Singh said that for a country like India where 55% of the population is dependent on the agricultural sector, economic growth can’t be centred on industry and trade. More than Rs 5 lakh crore worth of exports is linked with agriculture produce. But where is the participation of the farmer in this economic cycle? The farmers must be made to feel that they, too, have some right over the growing wealth of the country.

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On the question of how open the Modi government is to the farmers’ demand of legalising MSP, Birender Singh said that the Prime Minister’s announcement to repeal the laws was the first step in bridging the growing rift between farmers and the government.

“As the government has already announced, it will form a committee of all stakeholders, including farmers’ representatives, ministers and government officers to discuss all pending issues, including legalising MSP,” he said. He sees the Union government as ready to enter into dialogue with the farmers while keeping an open-minded approach.

Legalising MSP is not the only issue here. What the role of the farmers and agriculture at large should be in the national economy is the main issue and it should be the main focus, Birender Singh said. The country is poised to have a $5 trillion economy but big factories or corporate houses can not be allowed to take the lion’s share of that.

Birender Singh also noted that after China, India is the world’s largest producer of food grains. It is a leading economy in milk production as well as poultry farming, however, despite all this, the farmers who actually produce these foodstuffs are in distress. This throws light on some very important issues: there are some vital gaps in the equitable distribution of the wealth, for which corrective measures are must.

“That is why the farmers’ protests against the farm laws were valid and justified; so are their other demands,” he added.

On the question of whether or not cases against the protesting farmers should be withdrawn, Birender Singh said that it is a state issue. “I am sure that all these cases will be over once the farm laws are officially scrapped. Even the question of compensation will be settled amicably.”

“Punjab is leading in this because there are elections due in the state. The Congress government there is doing everything to lure the voters,” he added.

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Yogendra Yadav counters growing propaganda against legalising MSP

Meanwhile, Yoginder Yadav, one of the SKM’s key leaders recently wrote a piece for ThePrint in which he countered the apprehensions against legalising MSP being raised by a section of people.

Yogendra Yadav. Credit: PTI

Yogendra Yadav. Photo: PTI

Yadav said the apprehension that MSP will distort the market is unwarranted.

“As for the fear of food prices going up, the way to control it is to offer subsidised food to the poor, not to deny a fair price to the producer. The fact is that the ‘free market’ is and must be regulated all over the world to meet overall societal objectives. Farmers are offered subsidies and price support all over the world. If price assurance is a bad idea, why declare MSP in the first place,” he wrote in his article.

He further wrote, “There are multiple methods of ensuring MSP to all farmers. The government can procure more than it does today, especially in pulses, coarse grains and oilseeds. “

“For the rest, the governments need not purchase. The farmer can be given a deficit payment for the gap between the MSP and market price, as was done by the Haryana government this year for bajra,” he added

Also read: Madhya Pradesh: New App Allows Traders to Buy Crops Outside Mandis; Farmers’ Leaders Unimpressed

‘Legalising MSP will ensure crop diversification too’

Lakhwinder Singh said that one of the main reasons for monoculture farming in India’s Northern states, where the focus is only on water-guzzling paddy and wheat, is also rooted in the limited implementation of MSP.

Farmers in Punjab and Haryana are forced to grow paddy despite its ecological consequences because of the government assurance that it will buy their whole produce at MSP.

If MSP as a bench mark is ensured, the state government can really push farmers out of the wheat-paddy cycle and the focus can be shifted to growing maize, pulses and other crops, Lakhwinder Singh said.

Legalising MSPs for 23 crops may reduce instances of stubble burning, which is mainly done to paddy. Photo: PTI

Further, he laid out multiple results of this. “First, the problem of dwindling underground water would be addressed. Second, soil health would be improved. Third, issues like stubble burning, mostly associated with the paddy crop, would be brought under control. Fourth, the farmers’ incomes would be increased and fifth, the economy of the country would be diversified with chances of agriculture becoming the backbone of the national economy,” he said.

Lakhwinder Singh stressed that the corporatisation of agriculture is not the best way forward, no matter how much pressure free market forces try to assert.

As far as the apprehension that legalising MSP will lead to inflation and price rise goes, Lakhwinder Singh said that it is uncalled for since the role of the government is to regulate the functioning of the economy and to make sure that no one mints unreasonable profits, as is the case at present.

“Indian food grain producers in states like Bihar are forced to do labour jobs despite having huge landholdings because they are unable to get proper remuneration for the produce,” he said.