23rd May 2022

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All about MSP

The recently enacted law dismantling the monopoly of the mandis APMC (Agricultural Market Committee), thus allowing the sale and purchase of crops outside of these state government regulated market prices, may have failed, not face serious opposition from farmers. If it had included a provision that would ensure the continuity of the current procurement regime on the basis of the minimum support price (MSP).

  • A simple decision, in the sense that nothing in this law will prevent the government from announcing the MSP and undertaking crop purchases at these rates as before, could have softened any criticism that the new law is “anti-farmer”.

What does the law say about MSP?

  • The Agricultural Trade and Trade (Promotion and Facilitation) Bill does not provide legal support to the MSP. Forget about making it a legal right, there is not even a mention of “MSP” or “recruiting” in the bill passed by both houses of parliament last week.
  • Agriculture Minister Narendra Singh Tomar said the new legislation “has nothing to do with the MSP”. Instead, their goal is simply to give farmers and traders the freedom to choose to sell and buy agricultural products outside of APMC mandis facilities.
  • The National Food Safety Act 2013 (NFSA), passed by the previous UPA government led by Congress, provides a legal basis for the public distribution system (PDS) which previously operated only as a regular government system a right which gives any person belonging to a “priority household” the right to receive 5 kg of food grains per month at a subsidized price not exceeding 2 Rs / kg of wheat and 3 Rs / kg of rice. Priority households have been further defined to cover up to 75% of the country’s rural population and 50% in urban areas.
  • MSP, on the other hand, lacks legal support. Access to it, unlike cereals subsidized by the PDS, is not a right for farmers. They cannot demand it as a matter of law.

So what is the basis of MSP?

  • “It’s just government policy that is part of administrative decision making. The government declares the MSP for crops, but there is no law that requires its implementation, ”explained Abhijit Sen, former member of the Planning Commission and chairman of the Agricultural Prices and Costs Commission (CACP ).
  • Currently, the Center sets the MSP for 23 agricultural products: 7 cereals (rice, wheat, maize, bajra, jowar, ragi and barley), 5 legumes (chana, arhar / tur, urad, moong and masur), 7 oil seeds ( rapeseed-mustard). , peanuts, soybeans, sunflower, sesame, safflower and nigese) and 4 cash crops (cotton, sugar cane, copra and raw jute), according to the recommendations of the CACP.
  • But the CACP itself is not a legal body created by an act of Parliament. This, despite the fact that it was born in 1965 and that MSP were announced as early as the Green Revolution, starting with wheat in 1966-67.
  • The CACP, as its website states, is simply “an office attached to the Ministry of Agriculture and Agricultural Welfare of the Government of India.” You can recommend MSP, but the decision to correct (or even not correct) and enforce the law ultimately rests with the government.
  • “The government can buy MSPs if they want to. There is no legal constraint. Nor can it force others (private traders, organized retailers, processors or exporters) to pay, ”Sen noted.
  • The government buys wheat and rice in its MSPs. But this is more due to political constraint and the need to meet PDS food grain requirements, even more after the publication of the NFSA.
  • The only crop for which the MSP payment has a legal element is sugar cane. Indeed, their prices are governed by the 1966 decree on sugar cane (control) issued under the law on essential products.
  • This decree in turn provides for the setting of a “fair and remunerative price” (FRP) for sugar cane during each sugar year (October-September). But even the FRP, which was called until 2008-09 “legal minimum price” or MSP, is not chargeable to the government. The responsibility for paying the FRP to the farmers within 14 days of purchasing the cane rests solely with the sugar factories.

Has there been a measure to give legislative support to the MSP?

  • The CACP, in its report on the pricing policy for the 2018-19 kharif marketing year, suggested the enactment of legislation granting farmers “the right to sell to the MSP”. This, he said, was necessary “to build farmers’ confidence in purchasing their products.” This advice, as expected, was not accepted.
  • The ongoing farmer protests essentially reflect a loss of that same confidence. Is the dismantling of the APMC mandis monopoly in agricultural wholesale the first step towards the very end of the current purchasing program based on MSP, largely limited to wheat and rice? If the APMC were to become unsustainable due to the outsourcing of companies to the outside world, how will government agencies execute the government contracts currently taking place in Mandis?
  • These questions play in the minds of farmers, especially in states like Punjab, Haryana and the MP, which have well-established MSP public procurement systems. For them, the freedom to sell to anyone, anywhere, anytime has little value compared to the convenience of guaranteed supply from MSP.

What has the government done to answer these questions?

  • On September 20, Prime Minister Narendra Modi tweeted that “the MSP system will remain” and “government procurement will continue”. The Minister of Agriculture also noted that governments in the past had never found it necessary to introduce a law on MSP.
  • It remains to be seen if these little details would go well on the pitch. By announcing MSPs for the rabi crops for the next planting season on September 21 (this was done last year on October 23) and relaunching kharif purchases early next month, the government can hope to counter any reply important to farmers.
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