MSP in agriculture is competition in the free market

Minimum Support Price (MSP) has been an essential part of the agricultural policy of the country. There have been good intentions behind it like ensuring food security and protecting farmers from price risks. But it also has some unintended consequences like reduced diversity of crops and damage to the environment in some parts of the country.

Now there is a need to increase the income from agriculture, but it will not be good to give MSP a legal form. This may create problems in getting the right price and in the future production may deteriorate further.

A recent study by the National Institute of Agricultural Economics and Policy Research says that 15 percent of paddy farmers grow 53.6 percent of the country’s wheat but they do not have much share in government procurement (MSP).

Other problems with MSP are huge amount of money being spent from the exchequer, excessive production of water-intensive crops and inadequate storage facilities.

To improve agricultural income, it is important that the market works well. This includes investment in infrastructure and creating an affordable price chain.

Fluctuation in prices is always risky for farmers and to protect them from this, the study talks about paying difference of price. Under this, the difference in the price that farmers get in the market compared to MSP is compensated. Its aim is to make the MSP policy a source of income by removing it from procurement, but its implementation is also full of problems. Agricultural economist Ashok Gulati says that with this policy, farmers and traders can collude and reduce the market price much lower than the MSP.

India needs a free market and a strong agricultural value chain. Experts have also said that the growth in this sector is largely coming from products outside the scope of MSP.

Amidst the increasing pressure to open agricultural markets for trade, all stakeholders including the government will have to find ways to increase competition.

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