Introduction

• Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
• The Central Government declares MSP on 23 items like wheat, rice, pulses, etc. But, there is no guarantee that the Government will buy from everyone. The Government only ends up buying wheat, rice, and a few more items.
•  The minimum support prices are a guaranteed price for their produce from the Government. The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.

History of MSP

• The MSP was declared the first time in 1965 as a tool for agricultural price policy to meet the various objectives. Since then, the MSP performs an important function in realizing the various objectives related to agricultural price policy.
• The MSP system finally started in 1966-67 for wheat and was expanded further to include other essential food crops.

Why farmers are protesting

The fact that there is no law safeguarding MSP worked in favor of the government. While farmers have been allowed to sell their crops to any entity including private corporates, they have demanded a written promise on MSP from the government as they are afraid that corporates will start exploiting them in the absence of a minimum support price.

Imperfect concept

• The MSP concept gives a false guarantee to farmers and is flawed. Only 6% of the farmers get the benefit of MSP procurement and prices because traders do not buy at MSP and the Government also doesn’t procure all items every year.
• There is no uniform method of price discovery for non-MSP crops and this is the true problem that most of the farmers face.

What can be a solution?

Farmers do not know what should be the fair value of their produce. This forms the base of their exploitation. Whether it is from mandi traders or contract farming. Does anybody know what is the right price? So how can farmers figure out the price?

Price discovery: Commodity derivations are traded in India today. NCDEX and MCX are two exchanges that offer commodity derivatives. Future prices for agri-commodities can easily be checked here. These prices can be a base for farmers to decide their prices.

Farmer Producer Organizations: Farmers can come together and start FPOs where farmers can pool and collect their produce. FPOs exist in India already and they help farmers get the right price for their produce. FPOs can make farmers a collective for better bargaining. These FPOs need funding and educational support from the Centre and States Government.