Farmers Hit the Road: The Minimum Support Price Law Impact

Why in news?

• Recently,Farmers from Punjab, Haryana, and Uttar Pradesh, in particular, started their ‘Chalo Delhi’ march recently after a fruitless meeting with the Union government.
• The primary cause of the farmers’ protest is the legal guarantee of the Minimum Support Price (MSP). In addition, the farmers have called for the remission of farm debt and the execution of the Swaminathan Commission’s (2006) recommendations.

What is Minimum Support Price (MSP)?

•  About:
  • Minimum Support Price is a type of market intervention by the Indian government to protect farmers from any significant decline in farm prices. It is a fixed price for their produce from the government.
  • In India, the Minimum Support Price (MSP) is a floor price established by the government to guarantee farmers receive a minimum price for their crops, protecting their earnings and promoting agricultural output.
• Crops Under MSP:
  • Fair and Remunerative Prices (FRP) for sugarcane and MSPs for 22 required crops are announced by the government.
  • 14 kharif crops, 6 rabi crops, and 2 additional commercial crops are the required crops.
  • The following is a list of crops:
    • Pulses (5): Gram, arhar/tur, moong, urad, and lentil;
    • Cereals (7): Paddy, Wheat, Barley, Jowar, Bajra, Maize, and Ragi
    • Oilseeds (8): sesamum, nigerseed, toria, groundnut, rapeseed/mustard, sunflower seed, and soyabean
    • Raw cotton, raw jute, copra, dehusked coconut, sugarcane (FRP), and tobacco that has been flu-cured in Virginia (VFC).

How Minimum Support Price Has been Calculated?

• The Commission on Agricultural Costs & Prices (CACP) makes recommendations that the government uses to set the Minimum Support Prices (MSP) for crops.
• The CACP offers comprehensive MSP calculation formulas, which consist of:
  • A2 Costs: These are the expenses a farmer bears in producing a specific crop. It includes a range of inputs, including the cost of seeds, fertilizers, insecticides, leased land, labor, equipment, and fuel.
  • A2+FL expenditures : A2+FL covers the value of family labor in addition to A2 expenditures. The labor contributed by the farmer’s family to the production of crops is factored into this computation.
  • C2 Costs: C2 is an all-inclusive cost that takes into account the cost of A2+FL as well as other variables. The imputed rental value of owned property, interest on fixed capital, and any rent paid for leased-in land are all included in this full cost computation.
• The MSP should be established at a level that gives farmers a just reward for their labor and investment, according to government policy.
• The government wants to fix MSP at least 1.5 times the weighted average Costs of Production (CoP) for all of India in order to accomplish this.
• To guarantee that the MSP pays for the value of family labor in addition to the fundamental production costs—which is a substantial contribution in this regard—it computes this cost as 1.5 times of A2+FL.

What drives the demand for legislation on Minimum Support Price (MSP)?

1. Financial Viability of Agriculture: MSP ensures farmers receive a minimum price, protecting them from market fluctuations and ensuring fair returns on their investments and labor.
2. Debt Reduction: Rising debt burdens on farmers underscore the need for MSP legislation to alleviate financial strain exacerbated by minimal MSP increases and market discrepancies.
3. Livelihood Support: Legalizing MSP supports the livelihoods of millions of farmers, particularly small and marginalized ones vulnerable to market uncertainties.
4. Risk Mitigation: MSP legislation provides a safety net against income loss during unfavorable market conditions and natural disasters, reducing farmers’ bankruptcy risks.
5. Addressing Market Imperfections: MSP legalization can regulate middlemen and ensure farmers receive fair prices, addressing disparities in the agricultural supply chain.
6. Promoting Agricultural Growth: Legalizing MSP promotes agricultural investment, growth, and sustainability by providing price stability and income security.
7. Addressing Disparities: By guaranteeing a uniform price directly to farmers, MSP legalization mitigates regional disparities and contributes to poverty alleviation and rural development.

Overall, legalizing MSP is seen as essential for protecting farmers’ interests, ensuring food security, and fostering sustainable agricultural practices.

Why accepting farmers’ demands might not be considered favorable?

1. Market Interference Concerns: Warning against excessive interference in agricultural markets, suggests that setting MSP higher than market prices could lead to increased food inflation.
2. MSP Principle: Emphasizes that MSP, as the name suggests, is meant to establish a minimum price floor for farmers’ produce, not a maximum price.
3. Complexity of Issue: Acknowledges that there is no one-size-fits-all solution to agricultural pricing, highlighting the need for nuanced approaches.
4. Concerns Over Agitation Tactics: Criticizes aggressive agitation tactics by certain farmer unions, arguing that they undermine constructive dialogue and governance.
5. Committee Formation: Government’s establishment of a committee in 2022 to address agricultural issues, including MSP, natural farming, and crop diversification.
6. Union Participation: Notes that while the committee has begun its work, some farm unions have not joined it, indicating ongoing tensions between farmers and the government.
7. Current Situation: Describes the ongoing siege of Delhi by a splinter unit of farm unions, underscoring the continued unrest within the agricultural community.

FAQs

Q1: What is MSP law for farmers?Ans: The minimum support prices (MSP) for agricultural produce are legally guaranteed by law, and this is known as the farmers’ MSP law. In order to protect their revenue and encourage production, this law guarantees farmers a minimum price for their crops, which is determined by the government. Q2: Why farmers are again protesting?Ans: Farmers claim that promises made by the government during the 2020–21 protest have not been fulfilled. In addition, they have requested that the government forgive their debts and grant them pensions. Farmers have stated that counterfeit fertilizers, herbicides, and seeds ought to face consequences.