The government had announced a major MSP boost in the Budget. What’s the ground reality?

By Aman Bagaria

The Minimum Support Price (MSP) is a form of market intervention by the government of India to ensure farmers against any sharp fall in farm prices. The MSPs are announced as a part of the Budget schemes each year and has seen a major boost this year when compared to the amounts that were allocated for the same during the budget in the last fiscal year. The amount required to be reserved for the scheme this year is said to be between Rs 47000 crore and Rs 1.11 lakh crore so as to ensure that the MSP can be set at 1.5 times the input costs of each crop as has been announced by PM Modi. The MSP last year was at about 1.3 times the input cost and this huge leap can see farmers’ incomes to be raised by about 24%.

Ways to ensure MSP to farmers

What must be discussed at this juncture is the ways in which the present system of providing MSPs to the farmers can be improved and alternate schemes that also further the cause of the farmers.

The schemes that currently are in use to ensure that MSP is provided to the farmers are the Market Assurance Scheme (MAS), Price Deficiency payment scheme (PDPS), Private Procurement and Stockiest Scheme (PPSS). The Market Assurance Scheme (MAS) is one where the states would make direct payment of MSP into Aadhaar linked accounts of the farmers and then procure the produce from them to transport it to the warehouses for stocking and further distribution. The MAS in such cases includes the administrative costs of the likes of procurement, storage and any other price loss. The Price Deficiency Payment System (PDPS) is another form of payment of MSP where there is no actual procurement of the produce by the government but the farmers receive the difference between the MSP and the prices at which they sold their produce. The last scheme, the Private Procurement and Stockiest Scheme (PPSS) is one that seeks to increase private participation in the process of procuring the produce from such farmers. The scheme lays down methods to incentivise and authorise private bodies and institutions to buy produce at the MSP so as to reduce pressure on the government while simultaneously incorporate and interest a larger number of private bodies in the agricultural sector of the country.

Improvements in the system

A few obvious improvements that can be made in the scheme are that there must be proper registration of all farmers at the nearest procurement centres before-hand so as to ensure that these farmers can be given their assured prices with minimum hassle and that there is no unnecessary delay in the support that they must receive. There is a present ceiling of 25 quintals of produce that may be procured from each farmer, but such a limit must be removed so as to make sure that no one suffers exemplary losses simply because they had a high productivity. Another concern with the existing system is the warehousing capacity and the number and the conditions of such warehouses. The target that has been set by the government is the presence of functional warehouses at a distance of almost 20 km from a production hub so as to facilitate the transfer of production from the farmers to the state.

The private sector initiative

The attempts at introducing the private sector to participate in farmer welfare is a novel initiative and could go a long way in actually improving the present conditions and the goal of NITI AAYOG to develop a system of optimum farm and price realization so as to successfully double the income of the farmers. The increased MSP might have adverse effects of inflation on the everyday consumer but efforts are being made so as to weed out middlemen who keep a certain percentage of the profits which can be successfully achieved by improving the supply chain, making the markets more competitive, application of modern logistics so as to reduce price and improve the commerce in agricultural marketing.

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