MSP: Changing the face of India’s farming sector


When the Union Cabinet recently cleared a proposal to hike the minimum support prices (MSP) for the coming Kharif crops, opposition parties criticised the decision. Since they could not fault the increase per se, they questioned the timing and said it was politically motivated because it came ahead of critical Assembly polls in Madhya Pradesh and Rajasthan — two large agrarian States — and the 2019 Lok Sabha election. But, had the MSP hike not come, would the Congress not have gone to the people flaying the Centre for not increasing the support price and for thus being anti-farmer? There may or may not have been something in the timing, but the fact is that the Modi Government had much earlier announced its intent to hike the MSPs to ensure that the return over costs would be at leat 50 per cent over input costs. That will now happen for 14 Kharif crops covered under the enhanced MSP. The increase works to not less than 150 per cent of the cost of cultivation to farmers.

It is true that the demand from various quarters had been for the Government to take into consideration what is called the C2 measure in calculating the MSP — which meant that the increase in the support price should factor in inputed value of owned land rentals and interest on capital, while the present calculation (A2+FL) considers most other inputs such as the cost of seed, fertiliser, human capital and animal labour etc, but leaves out the inputs the C2 system recommends. Nonetheless, the increase in MSP cannot be brushed aside as it is not just substantial — for instance, a return of 12 per cent for paddy and more than 96 per cent for bajra — but also timely, given the agrarian distress across the country.

Besides, the 50 per cent return over the A2+FL costs is a first for this Government. A realistic MSP has a direct connect with two issues: the buffer stock the Government holds and the public distribution system (PDS). High MSP encourages farmers to enhance their production, and this in turn helps the Government to procure in adequate quantities the MSP-linked crops to meet the twin needs. At times the Government procures produce at a rate higher than the MSP (but lower than the open market price), to meet exceptional circumstances.When the MSP is high, the procurement price in such exceptional cases too get higher, which is good for the farmer.

The revised MSP can be one of the contributory factors to the Centre’s resolve to double farmers’ income by 2022, promise the Government has made and repeatedly reiterated. But it will take more than a good MSP to realise that goal, which is why one needs to be view the Modi Government’s initiatives not just from the MSP angle, but holistically. The growth of the agricultural sector is politically important, of course, but it is also essential for keeping the country’s economy in robust shape. According to the Economic Survey of India 2017-18, tabled in Parliament earlier this year, the agricultural sector was expected to grow at 2.1 per cent in the fiscal year gone by. It’s a challenge to keep the farming sectarian high gear, given the rapid pace of urbanisation and fall in the number of workforce engaged in agriculture. According to World Bank estimates, half of India’s population would be urban by 2050, and the percentage of agricultural workers to the total workforce could slip from 58 per cent in 2001 to just 25 per cent by 2050. So clearly, the challenge is twofold: One, to ensure that agriculture remains an attractive option so that people do not abandon it; and two, promote an increased level of mechanisation to both counter the reduced workforce and improve production per hectare.

A slew of the Modi Government’s decisions have been in that direction. The last Union Budget, for instance, had promised a 150 per cent increase in the MSP, which has now been done. The Budget announced a resolve to establish 470 Agricultural Produce Market Committees (APMCs) and connect them to the electronic platform of the National agricultural Market (eNAM).It also promised to set aside a sum of Rs 2,000 crore for the realisation of an agricultural market fund. The agricultural credit was raised to Rs 11 trillion. It may be recalled that Union Minister for Finance Arun Jaitley had begun his Budget speech with initiatives for the farming sector, thus emphasising his Government’s priorities.

Given that doubling of farmers’ income cannot happen merely through focus on traditional agriculture, the Government has been pushing for diversification into cash crops, adopting horticulture, pisciculture, silkworm farming etc. A 2017 report of NITI Aayog on doubling farmers’ income has highlighted the issue most effectively. It concluded that for such doubling to happen — which, it said was both “needed” and “attainable” — the country needed to increase the “sources underlying growth in output” by 33 per cent. The report further said that quality seed use had to increase by around 13 per cent, fertiliser by 4.4 per cent and power supply by 7.6 per cent. Incidentally, these are areas where the Modi Government has contributed well. Rural power supply has been ramped up dramatically, with most villages having been electrified; fertiliser availability is no longer an issue, and the neem-coating of urea has ensured that urea meant for fields can no longer be illegally diverted to non-agricultural use; and quality seeds at affordable rates are available round the corner.

The NITI Aayog report also pointed out other areas that need focus — and the Government has been working in that direction. In its roadmap and action plan section, the study also spoke of six areas other than the productivity of traditional crops, that are crucial. They are: Increase in the production of livestock, improvement in the efficiency of input use (cost saving), increase in crop intensity, diversification into high-value crops, improved price realisation by farmers, and shift of cultivators to non-farm jobs.

Interestingly, the report also added that, if the same level of progress in various sources of growth, as experienced in the previous 10-15 years, is maintained, farmers’ income can go up by as much as 75 per cent by 2022-23. However, to realise the 100 per cent mark by 2022 requires that additional push — and this can happen when the progress in various sources of growth is accelerated by 33 per cent.

Few regimes in the recent past have gone beyond paying lip service to the agricultural sector. The Modi Government has at least attempted to break the mould. Large-scale reforms in farming have begun, and if they remain on track, substantive results will begin to show soon.

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The writer is senior political commentator and public affairs analyst

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