THE M.S.P CONUNDRUM

 

MSP or Minimum Support Price of food grains was introduced in the 60s during the Green Revolution to encourage farmers to grow food crops. This is the floor price at which the food grains are procured from the farmers by the central and state governments. Though 23 crops have declared MSP but bulk of procurement is of wheat and paddy only.

 

The agitating farmers and their Marxist supporters argue that since succeeding governments have been declaring MSP year after year, twice a year, why not make it a law? After all when 900 million farm dependent individuals are producing food grains for 1.38 billion countrymen should their income not be legally guaranteed? By not making it legally binding the feel the government is not sincere and intends to trick the farmers at some stage in future. They have a suspicion that the declaration of MSP twice a year is just a wink and nudge policy, which is nothing to be proud of. They claim that their demand for legal guarantee of MSP is in the constitution of our nation as a fundamental right to life and livelihood of 900 million people and so the government can no longer ignore it.

 

So, where is the problem? The problem is in the not so subtle demand of the Marxists to nationalization agriculture in our country. They are asking the government to use the tax payer's money to procure food grains, in far excess of our needs at a high price and then sell it at a low price through our PDS and ration shops till it goes bankrupt. These are the same socialist ideas which resulted in mortgaging of our gold stocks in London in 1991 outraging our national sentiments.

 

Now if you thought that was the only demand of the agitating farmers you are wrong. They want the government to enact the law in such a way that even private traders will be compelled to buy food grains at the same inflated cost! Why will they do that and suffer losses? Why will they not import the same grains from overseas market at a fraction of the declared MSP? No, our agitating farmers will then want the government to increase tariff on such imports to legislate losses of the private sector to suit their Marxist whims and fancies! Naturally the traders will not suffer losses and so we, the tax payers, will be forced to pay higher price for food grains.

 

Can you even imagine what will actually happen if MSP is legalized? There will be no buyers and the farmers will be forced to sell surreptitiously at a price even lower than the actual low market price. Inspector Raj will once again prosper and black marketing of food grains will become a norm. Black Market traders will be prosecuted and jailed and our food distribution system will collapse. 

 

Let us forget the obvious shortcomings of legislating MSP and appreciate a few other irregularities. The government of the day has acquired 100 million tons of food grains from the farmers at MSP and have spent 2 lakh crore rupees in the process. This stockpile is far more than the buffer stock required for our entire country. So what are we going to do with this excess? Surely we cannot export them, because at the procurement price which is MSP we cannot compete with other food grain producing countries and the World Trade Organization(WTO) will not allow us to export heavily subsidized food produce anyway. So all this excess food grains, after giving free rations to the poor will still remain in our godown, rot in the coming monsoon and get eaten by rats.

 

Then again, MSP is only declared for 23 crops and the government ends up buying wheat, paddy and a few pulses. So naturally, the farmers of Punjab, Haryana and Western Uttar Pradesh, from where most food grain procurement is done, end up cultivating only wheat and paddy. So there is excessive procurement of these crops at the expense of other crops like oil seeds and pulses which may be more nutritious and earn more export revenue. 

 

Paddy is a water guzzling crop and it depletes the water table of this area and so it is totally unsuitable to grow here. The water for this crop is pumped out using electricity which in turn is either free or grossly subsidized, thus further taxing the tax payer. 

 

As if that was not enough, after harvesting the paddy the stubble is burnt in the field to prepare the field quickly for subsequent wheat crop. Stubble burning emits  gaseous pollutants such as, carbon dioxide (CO2), carbon monoxide (CO), nitrogen oxides (NOx), sulfur oxides (SOx), and methane (CH4) as well as particulate matters (PM10 and PM2.5) causing serious damage to human health and the environment. About 84 Mt (23.86%) of the stubble is burnt on-field each year immediately after harvest. The disastrous haze observed over India during the winter season has been linked to stubble burning as it coincides with the burning periods (October-November). 

 

The irony of MSP is that the poor farmers get virtually nothing out of it because they have very little or no surplus to sell and they live on the produce of their land. So, though they have their own land but financially they are no better than farm labourers. The reversal of farm laws have made the plans of their poverty eradication even harder. Accounting for nearly 5 crore (In Indian number system crore is 100 million or 10,000,000) of India's 12.5 crore of unviable land holdings the states most likely to suffer are Bihar, Jharkhand, U.P and M.P. So subsidized big farmers will hake hay while sun will not shine on poor farmers. The hypocrisy of the Marxists was never more obvious when the abandoned the poor small farmers and took the side of large farm owners!  This will effect the poor small farmer's multidimensional poverty index constructed on their health, education and standard of living indicators like nutrition, years of schooling and amenities like  pucca housing, cooking fuel, electricity sanitation, household assets etc. The government's welfare schemes will have to take care of them and they will remain poor.

 

The concept of nationalizing agriculture, setting a MSP for every crop and forcing the private sector to buy at that inflated price will not only lead to unprecedented corruption but will be extremely harmful for our economy. The demand and supply equation of the market should decide the price of every food grain and not the ministers and bureaucrats sitting in centre and state capitals. We have to reject this failed policy of Marxism outright. A government’s duty is to ensure justice, security and infrastructure and has been so since ages. Even Kautilya's Arthashastra emphasizes on free trade and good regulations.

 

Solution

Yes, farmers require help and that is undeniable but let that not be in the form of MSP and unhealthy subsidies in seed procurement, fertilizers, electricity etc. Let us form a committee comprising of farmers, agriculture scientists, economists, judicial luminaries and government representatives and calculate the input cost and cost of labour. Then let us decide what amount the farmers should earn per hectare for every crop so that his income is doubled. Let us subtract the market price of his crop and pay the rest as Kisan Samman Nidhi. But for this to take force there should be strict conditions - the farmers will grow what the country needs and not what they have grown traditionally. They will have to abide by all the environmental laws, pay for seeds, fertilizers and electricity. All payouts should be digital, without any intervention by middle men, and farmers earning beyond the standard deduction should pay taxes like the rest of the countrymen. For a very long time the rich farmers and the corrupt politicians have avoided taxes by showing spurious farm incomes. 

 

Let there be wide consultation and new laws be enacted to facilitate enterprise. Only then the private sector will invest in food processing, storage, transportation and export. Only wheat and paddy cultivation is not farming. We need policy for our dairy sector, fisheries, poultry farming, bee keeping and all of them have export potential. Getting bogged down by a bunch of Marxist loonies is not helping our greater cause.