Farmer’s Protest: Why Ruckus again on MSP? How is it decided and how much will farmers benefit from it?

Farmer’s Protest: Two years ago, the Indian government ended the farmers’ protest by withdrawing three controversial agricultural laws. But one of the most important demands of the farmers, ‘guarantee of MSP on crops’, has still not been fulfilled. For this reason, all the farmer organizations have once again raised an alarm against the government.

Thousands of farmers from UP, Haryana, Punjab and Rajasthan have reached Delhi border. Farmers allege that the government did not fulfill its promises made two years ago. Most importantly, no law was made on MSP.

In such a situation, many people have questions in their minds that what is MSP, how is it decided, what is the Swaminathan formula, why is it important for farmers, what does the government say, what is the government rate for which crop and when the MSP? If it is certain then what are the farmers afraid of?

Firstly understand, what is MSP?

MSP means Minimum Support Price. In short it is called Minimum Support Price. This is the price of farmers’ crops which is decided by the government. The government first purchases the grains that reach the people of the country from the farmers at MSP. Then the government delivers this grain to the public under the ration system or other government schemes. 

Apart from this, it is expected that even if sold directly in the market, the farmers will not get the price of the crop less than the MSP. In this way, farmers get the right price for their crops and avoid exploitation by middlemen.

The system of MSP has been running for the benefit of farmers for 5 decades. Even if the price of crops falls in the market due to any reason, the Government of India still buys that crop at MSP. Farmers do not suffer loss due to this.

Who decides the MSP?

The government decides the price of Rabi and Kharif crops every year. This MSP is decided on the recommendation of the Commission for Agricultural Costs and Prices (CACP). CACP decides the prices of crops based on their cost and yield and sends them to the government. The government announces MSP after discussing these suggestions.

When was the MSP first decided?

The CACP committee was established in the year 1965. The committee mainly consists of four members. It consists of a Chairman, a Member Secretary and two other Secretaries. On the recommendation of the committee, the Government of India first announced the minimum support price for wheat in the year 1966-67. 

For the first time, the government had fixed the price of wheat at Rs 54 per quintal. At that time there was Indira Gandhi’s government in the country. It is said that the Green Revolution started from here. After wheat, MSP was gradually implemented on other crops also.

Is MSP fixed on all crops?

No! MSP is not given on every crop. Only 23 crops have been kept under the ambit of MSP. These include 7 crops of cereals, 5 of pulses, 7 of oilseeds and four commercial crops. These include crops like paddy, wheat, maize, barley, millet, gram, lentils, urad, moong, tur, mustard, soybean, jute, cotton, sunflower, sugarcane.

Every year the MSP is decided even before the sowing of crops. Many farmers decide to sow crops only after seeing the MSP. After the crop is ready, the government buys grains at MSP through different agencies. These grains are stored in warehouses. After this, it is sent to the country or abroad as per the demand.

In the general budget of 2018-19, the government had announced that the MSP of all essential crops will be fixed at least 1.5 times the production cost.

When MSP is fixed then what are farmers afraid of?

While deciding MSP, it is kept in mind that farmers get at least 50 percent profit from their cost. But in reality this does not happen. Many times farmers are forced to sell their crops at a price lower than the MSP. Because MSP is just a policy, not a law. In such a situation, farmers cannot even go to court and claim their rights.

Of the 23 crops, only sugarcane is subject to legal restrictions to some extent. According to the Essential Commodity Act, it is necessary to pay a fair price for sugarcane. Farmers fear that the government can end the MSP system whenever it wants because it is just a policy. According to the Shanta Kumar Committee formed in 2014, only six percent of the farmers could get the benefit of MSP.

What changes do farmers want on MSP?

Prime Minister Modi has assured the farmers that the MSP system will continue and the government will continue purchasing under it. But farmers are not satisfied with this. Farmers want the government to make a law on MSP so that they can get guarantee. 

Farmers want that purchasing crops at prices lower than MSP should be declared a crime under the law. Besides, there is a demand to bring other crops also under the ambit of MSP.

How big a burden is MSP on the government?

According to government data, the production of 23 crops included in the scope of MSP was Rs 10.78 lakh crore in the year 2019-20. Of these, about 25 percent of the crop is kept aside by farmers for their personal needs and animals.

The government does not have to pay any money for sugarcane. The money for sugarcane comes from the sugar mill. The government purchased crops worth Rs 2.7 lakh crore in 2019-20 through agencies. This is about one third of the total production. However, due to this purchase, the price of the crop increases in the market and farmers earn profits. 

Why is the government not guaranteeing MSP?

MSP is always given for a ‘fair average quality’ of the crop. That means, only when the crop is of good quality will it be purchased at MSP, otherwise not. In such a situation, if the government has given guarantee on MSP, then how will it be decided whether the quality of that crop is good or not and what will happen to it if the crop does not meet the set criteria. Secondly, before including other crops in MSP, the government will also have to decide its budget.

Many committees have suggested to the government that the purchase of wheat and paddy should be reduced. The Government of India is also working on this suggestion. Now this fear is haunting the farmers that if the government purchases less then they will be forced to sell their crops to private companies and middlemen. In such a situation, they will get less price and will suffer loss.

What is Swaminathan Report?

Modi government recently announced the award of Bharat Ratna to late agricultural scientist Dr MS Swaminathan. He is considered the father of ‘Green Revolution’ in India. In 2004, the National Commission for Farmers (NCF) was formed under his chairmanship. 

The Commission presented five reports till 2006, in which suggestions were given to improve the agricultural system in India. However, the report has not been implemented since then. At that time there was Manmohan Singh’s government at the centre. These are known as Swaminathan reports and there are often demands to implement these reports.