Opinion: It's Time To Focus On The Real Issues Facing India's Farm Sector

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Some groups representing farmers have gone on agitation yet again, a little over two years since they laid siege around Delhi, which was withdrawn after the three contentious farm laws were repealed. At the top of their list of demands this time is the revision and legalisation of the minimum support price (MSP) for crops.

Each year, the Union government fixes Minimum Support Prices (MSP) for 22 mandated agricultural crops and Fair and Remunerative Price, or FRP, for sugarcane, on the recommendations of the Commission for Agricultural Costs and Prices (CACP).

Such procurement is limited to altogether 23 crops and, again, largely confined to paddy and wheat. It benefits only 10-12% of the peasants in the country and does not cover all states. The Union government undertakes procurement through the Food Corporation of India (FCI) and state agencies. Under this policy, whatever food grains are offered by farmers within the stipulated period and conforming to the specifications are purchased at the MSP.

Additionally, oilseeds, pulses, and copra of fair average quality (FAQ) are procured from registered farmers under the umbrella scheme of PM-AASHA, as per its guidelines at MSP in consultation with the state government concerned as and when the market price of these produce falls below MSP.

MSP Benefits Vary

But MSP benefits are not uniform across the country. For example, in Bihar, where the Agricultural Produce Marketing Committee (APMC) Act was repealed in 2006, farmers sell their produce to the state-run Primary Agriculture Credit Society (PACS), which procures at MSP. However, procurement by the PACS has been extremely low in Bihar. Many farmers, even some agents, travel to Punjab from Bihar every year to sell wheat and paddy in mandis. This despite the administration's efforts to keep them away from mandis during the buying season.

The system thus creates disparity across regions.

Ballooning Food Subsidy  

Incidentally, food subsidy comprises a major part of the total expenditure by the Department of Food and Public Distribution. The subsidies constitute approximately one-ninth of India's total budget expenditure of Rs 45 lakh crore for the current financial year, ending March 31.

Food subsidy serves as a means to protect farmers against a decline in market prices and provide consumers with affordable food grains through the Public Distribution System (PDS).

India's agriculture sector accounts for 15% of the country's gross value added (GVA) and is the largest source of employment. However, the farm sector has been ailing for quite some time. While it employs more than half of the workforce, the average monthly income of farmers is pegged at around Rs 10,300.

The MSP Formula

Protesting farmers are demanding that MSP be made a legal right. They demand compensation at the rate of C2+50, while the government is offering a price calculated on A2+FL and adding 1.5 to it. Here, A2 represents input costs of a particular crop, including seeds, fertilisers, pesticides, leased-in land, hired labour, machinery, and fuel. A2+FL means adding the value of family labour to input costs. C2 represents comprehensive cost, which includes A2+FL added to the imputed rental value of owned land, plus interest on fixed capital and rent paid for leased-in land. The demand is to revise MSP and offer C2 with 50% added as profit against expenses.

Land rentals vary across regions or states and according to their location. Thus, it would be extremely difficult to assess the actual impact of any MSP revisions after accounting for C2+50.

The total food grain production in the country for the year 2022-23, as estimated by the Department of Agriculture and Farmers Welfare, was a record 3,296.87 lakh tonnes. As has been the case, rice and wheat accounts contribute most to the food basket. 

However, a government-appointed committee is currently looking into the aspect of MSP and other issues related to farmers' welfare.

MSP Regime Alone Not Enough To Tackle Farm Distress

Unfortunately, agrarian reforms have not been addressed till now. Around 85% of farmers are small and marginalised, with an average landholding size of less than 2 hectares. Most of them lack access to both production and post-production functions, such as technology, quality inputs at reasonable prices, seed production, units of farming machinery, value-added products, processing, credit, investment, and, most importantly, markets.

Such farmers are at the mercy of middlemen, even if they manage to access the Agricultural Produce and Livestock Market Committee (APMC) yard to avail government benefits. In fact, many of them - or their family members - do off-jobs as part of a rural employment scheme called the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to make ends meet. They don't have meaningful access to modern market systems. Such privileges have remained confined to a small group of wealthy farmers.

Add to this the fact that MSP is among the factors responsible for the distortion of cropping patterns, contributing to stubble burning. Farmers often prioritise crops that fetch higher MSP, neglecting those essential for rotation to benefit the soil.

Inflation, WTO Obligations: Other Concerns

Moreover, there's the issue of MSP fuelling inflation. In August last year, key government departments expressed their concerns over a proposal to hike MSP for kharif crops in the 2023-24 season. According to reports, these concerns ranged from inflation to meeting World Trade Organization (WTO) obligations and addressing labour shortages and rising wages.

It's high time that the parties concerned reach an agreement and address the issues affecting farmers comprehensively, rather than approaching them in a piecemeal manner. MSP, by no means, is a panacea.

(Jayanta Bhattacharya is a senior journalist writing on polls and politics, conflict, farmer and human interest issues.)

Disclaimer: These are the personal opinions of the author