Budget 2018: Focus on MSP ideal for tackling farm distress -Ramesh Chand

-The Economic Times

The agriculture sector and farmers are passing through a difficult phase. The sector suffered a blow from back-to-back droughts during 2014-15 and 2015-16 followed by low and depressed farm level prices during 2016-17 and kharif 2017, mainly due to global price trends. This has intensified the demand for ensuring MSP (minimum support price) and raising MSP.

The forthcoming budget needs to take a call to launch effective measures to address the agrarian distress, with emphasis on measures that deliver immediate results. This includes price as well as non-price factors.

Non-price factors like technology, market reforms, infrastructure and institutions are quite important to raise growth and farmers' income, but they take time to deliver results and thus are important for medium and long term, whereas better prices result in immediate effect on farmers' income and also on productivity and growth. In the light of this the forthcoming budget should accord top priority to measures that translate into remunerative prices for farm produce with immediate effect. MSP is one such instrument.

The government notifies MSP for 23 commodities and FRP (fair and remunerative price) for sugarcane. These crops cover about 84% of total area under cultivation in all the seasons of ayear. About 5% area is under fodder crops which are not amenable for MSP-type intervention. Thus, the present list of MSP crops covers close to 90% of the cultivated area. The system of MSP, if implemented fully, will leave only a very small segment of producers without price benefit.

This system is facing two serious issues. One, MSP is notified for 23 crops but effectively ensured only for two-three crops. Two, given the low scale of production, attributable to small size of holdings, the margin over cost in the prevailing system of MSP does not generate reasonable surplus (income) for the farmers. Not surprisingly, farmers have been demanding effective implementation of MSP for all the crops and keeping MSP 50% higher than cost.

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The Economic Times, 31 January, 2018, https://economictimes.indiatimes.com/news/economy/agriculture/budget-2018-focus-on-msp-ideal-for-tackling-farm-distress/articleshow/62715338.cms

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