IASNOVA
Definition and Purpose of MSP:
- Minimum Support Price (MSP) is a guaranteed price paid to farmers by the government for their produce.
- It is based on the Commission for Agricultural Costs and Prices (CACP) recommendations, considering production costs, demand-supply, market trends, and other factors.
- MSP aims to provide fair prices to farmers and encourage crop diversification.
CACP and Decision-making:
- The CACP, under the Ministry of Agriculture and Farmers Welfare since January 1965, recommends MSPs.
- The Cabinet Committee on Economic Affairs (CCEA), led by the Prime Minister, finalizes MSP levels.
Crops Covered:
- MSP is recommended for 22 mandated crops plus a fair and remunerative price (FRP) for sugarcane.
- Includes 14 kharif season crops, 6 rabi crops, and 2 commercial crops.
Cost Considerations for MSP:
- Three types of production costs are considered: ‘A2’, ‘A2+FL’, and ‘C2’.
- ‘A2’ covers direct cash and kind costs like seeds, fertilizers, and hired labor.
- ‘A2+FL’ adds an imputed value for unpaid family labor to ‘A2’.
- ‘C2’ is the most comprehensive, including ‘A2+FL’ plus rentals and interest on owned land and fixed assets.
- CACP bases MSP recommendations on both ‘A2+FL’ and ‘C2’, but primarily uses ‘C2’ as a benchmark.
Necessity of MSP:
- Introduced in response to declining commodity prices and farm distress, exacerbated by events like the 2014-15 droughts, demonetization, GST rollout, and economic slowdowns.
- Aims to ensure fair compensation for farmers, countering rising input costs and economic challenges, and is crucial in agrarian states for reducing poverty and distress.
M S SWAMINATHAN COMMISSION Recommendations
The Swaminathan Commission, formally known as the National Commission on Farmers (NCF), was chaired by Professor M.S. Swaminathan and submitted its reports between December 2004 and October 2006. The commission was tasked with finding sustainable solutions to the issues faced by farmers in India. Its recommendations are crucial for UPSC aspirants as they cover various dimensions of agricultural reforms, rural development, and food security. Here are the key recommendations categorized under suitable headings:
Land Reforms
- Fast track land reforms to ensure access to land for tenant farmers and enhance the security of land tenure.
- Implement land leasing laws to enable farmers to lease land without fear of losing ownership.
Irrigation and Water Management
- Expand irrigation coverage, focusing on “more crop per drop” and ensuring efficient water management practices.
- Revive traditional water harvesting structures and promote micro-irrigation techniques like drip and sprinkler systems.
Credit and Insurance
- Expand the reach of institutional credit to reduce farmers’ dependence on informal credit sources.
- Provide a moratorium on debt recovery, including waiving of interest on loans for distressed farmers.
- Introduce a comprehensive social security package for farmers, including health insurance and accident insurance.
Food Security
- Implement universal Public Distribution System (PDS) to provide food grains to the poor at affordable prices.
- Reorient the Minimum Support Price (MSP) policy to ensure prices cover costs of production plus 50%, ensuring a fair profit margin for farmers.
Agricultural Productivity
- Promote the adoption of sustainable farming practices, focusing on conservation agriculture to enhance soil health.
- Encourage the cultivation of high-value and high-yield crops to increase farmers’ income.
Technology and Research
- Strengthen the agricultural research and extension system to provide farmers with access to modern technology and practices.
- Promote the use of Information and Communication Technology (ICT) in agriculture to provide real-time information and services to farmers.
Marketing and Infrastructure
- Develop rural infrastructure, including roads, storage facilities, and market access, to reduce post-harvest losses and improve supply chains.
- Reform the Agricultural Produce Market Committee (APMC) Act to enable farmers to sell their produce directly to buyers, ensuring competitive prices.
Food Processing and Value Addition
- Promote agro-processing and value addition to agricultural products to increase farmers’ income and generate employment.
- Establish food parks and agro-processing zones with necessary infrastructure and incentives to attract investment in this sector.
Women and Agriculture
- Recognize the role of women in agriculture and ensure their access to resources, inputs, credit, and training.
- Implement gender-sensitive policies and programs to empower women farmers and ensure their participation in decision-making processes.
Sustainable Development and Environmental Protection
- Integrate sustainable agricultural practices with national policies on biodiversity conservation and climate change mitigation.
- Promote organic farming and reduce the reliance on chemical inputs to safeguard the environment and public health.
SHANTA COMMITTEE ON FCI
The Shanta Kumar Committee, formally known as the High Level Committee (HLC) for Restructuring of Food Corporation of India (FCI), was set up by the Government of India in 2014. The committee, chaired by Shanta Kumar, was tasked with suggesting reforms in the food and public distribution sector. Although its primary focus was on the restructuring of FCI, it also provided important recommendations regarding the Minimum Support Price (MSP) system. These recommendations are significant for understanding the agricultural policy framework in India:
MSP Recommendations by the Shanta Kumar Committee:
Direct Procurement from Farmers: Suggested that procurement operations should be decentralized and states should have the flexibility to directly procure from farmers, reducing the role of intermediaries.
Rationalization of MSP: Recommended that the MSP should be reviewed and linked more closely with the market prices to ensure that it does not distort the market.
Limited Procurement: Proposed that the government’s procurement should be limited to the needs of the public distribution system and other welfare schemes, rather than unlimited procurement at MSP.
Crop Diversification: Suggested the MSP system should incentivize crop diversification towards less water-intensive crops, helping in sustainable agricultural practices and water conservation.
Price Deficiency Payment System: Recommended the adoption of a “price deficiency payment” system in place of physical procurement by the government. Under this system, if market prices fall below the MSP, farmers would be compensated for the difference, which could reduce the fiscal burden on the government and storage issues.
Private Sector Participation: Encouraged greater participation of the private sector in grain procurement and storage, aiming to bring efficiency and reduce the fiscal burden on FCI.
Risk Management Tools: Suggested the development and promotion of risk management tools, such as crop insurance, to protect farmers against price volatility and crop failures, reducing the dependence on MSP.
Direct Cash Transfers: Proposed exploring direct cash transfers to farmers in areas with well-functioning markets as an alternative to the MSP-based procurement system, aiming to enhance income support to farmers and reduce market distortions.
