The politics of MSP

Amidst the unstoppable price rise of almost all essential commodities, Government has hiked the Minimum Support Price (MSP) for mainly for the pulse crops. MSP of pulses seen a substantial hike of Rs 700 to a maximum of Rs 3,170 a quintal but support for paddy has been increased by a meagre Rs 50 a quintal. The newly announced MSP for pulses, considered to be the wholesale market benchmark, is just about 30--50 per cent of retail prices of some varieties like moong, urad and arhar that are being sold for up to Rs 100 a kg in retail market.

The highest increase was given for the widely consumed arhar dal (tur), the MSP for which has been increased to Rs 3,000 a quintal from Rs 2,300 last year. The MSP for moong, another popular variety, has been increased to Rs 3,170 per quintal from Rs 2,760. Support price for urad has been increased to 2,900 a quintal from Rs 2,520 last year. The hike in MSP for arhar is Rs 200 more than what the Commission for Agricultural Costs and Prices (CACP) had recommended for the season. Arhar dal prices had skyrocketed to about Rs 100 a kg a year ago and even now it is ruling between Rs 80-90 a kg. Moong is selling above Rs 100 a kg in the retail market.

India is a net importer of pulses despite being the largest producer. The country produced 14.77 million tonnes in 2009-10 against a requirement of 18-19 million tonnes. Unlike in the case of paddy and wheat, the government does not procure pulses from farmers, but it intervenes if prices fall below the MSP.

The MSP for paddy (common variety) has been increased to Rs 1,000 per quintal from Rs 950 last year, while the new MSP for Grade A variety stands at Rs 1030 per quintal from Rs 980. And for other crops, like oilseeds and coarse grains the same has been not given much significance and the support price has been raised to Rs 50 to Rs 150 on an average.

Agriculture Ministry clarified that higher MSP was meant as an inducement to farmers to go for increasing the acreage for cultivation of pulses, for which India is a net importer and the sharp rise in prices is on account of higher commodity prices globally. But since MSP being in existence, there have been little changes in the pulses coverage and on the other hand the area got reduced / stagnated, which utters the falsify the claims of the ministry and some other supporters.

This is perhaps in the pious hope that an assured higher minimum price would encourage growers to expand acreage for the legume. Nothing much really, if the recent past is any guide. Between 2007 and 2009 kharif, MSP for the three pulses was raised (45-55 per cent); but output numbers are far from impressive. If anything, output of the three pulses actually declined from 2007 levels. This does not come as a surprise. Acreage has stagnated. Output is trapped between 13 million and 15 million tonnes. Yields continue to be rather low at about 600 kg per hectare. In developed economies pulses yields are in excess of 1,500 kg/ha. These data also contradicts the claims made by the Krishi Bhawan to encourage the production of agriculture produces by announcing a rise in the MSP. According to a recent analysis provided by the Religare Commodities, sustained increase in the MSP over the years has failed to get reflected in the increased production over past several years. The report revealed that MSP has not far been able to achieve the desired goal in absence of the vigorous procurement operations and public distribution system.

India's first target should be to attempt to raise pulses yields by 150 kg/ha to about 750 kg/ha. On 24 million hectares, such a small increase in yield would generate 35 lakh tonnes of additional production, the quantity the country imports at present. India can, therefore, become less reliant on imports even by raising yields marginally.

It is the progressive states of Punjab and Haryana, which always lobby and ask for the more and more hike in the MSP and all freebies / waivers either water, fertilizer subsidy. free power / electricity. These states agriculture has become MSP dependent and support based, and all the state’s policy are very much linked to it. It is not uncommon to see Punjab farmers and politicians protesting and staging dharnas before Delhi on the issues of paddy and wheat MSP and procurement. But still they are proud to be termed as the granaries of India and never mind introducing themselves with the lines “We feed the whole Nation”. It has not to be forgotten the huge compensation the GOI making to them to run the show. Pulses should be aggressively promoted in the grain mono-cropping areas of Punjab, Haryana and western Uttar Pradesh where soil health needs to be restored and an impending ecological disaster avoided. Pulses offer an ideal option for crop rotation to break the rice-wheat-rice cycle. Either by incentivising or through law, crop rotation should be stipulated. Till how many years we would see the monopoly of Punjab and Haryana over the maps of Indian agriculture at the cost of others.

We are heading towards assembly elections in 4-5 major states, so it is government’s clear bait of appeasement for the rural population, particularly in the pulse producing belts of Uttar Pradesh, Madhya Pradesh, Bihar etc. So MSP become the weapon against already suffering masses and whenever there is opportunity it has milked accordingly by the ministry and the govt in seat/ power/ charge.

Any crop specific program/ endowments and subsidies only lead to the mono-cropping either it being the green revolution or, any subsidy / MSP based supports. While higher MSP may be a motivating factor, it is simply not good enough to boost output. A growing population with rising purchasing power may well be able to afford pulses at the current high prices and have other protein choices. But it is the poor who are genuinely hurt by higher prices of pulses; and it is the poor who certainly deserve to consume more pulses because of their malnourishment or under-nourishment. In the last five years, New Delhi has done almost nothing worthwhile to mitigate this huge nutrition problem of the poor.

While Govt. is virtually unmoved and unfazed on the issue of price rise lot of talks/ presumptions since last one and half years period, with little action on the front and only putting restriction on the import-export would not able to tame the same and bring any solace to masses. Farm loan waiver, Subsidies, MSP causing much harm to the agriculture rather than doing any good for the sector and the farmer at a large. So, it is the clear politics rather economics decision that is sensitizing the ever-increasing MSP for the agricultural produces. The decision has been taken under the political groups’ pressure but govt. should not succumb to the tactics. The government is probably on the mistaken road to fix the problem of inadequate production through the MSP mechanism, without investments in basic infrastructure. A mere increase in MSP, however steep, is unlikely to deliver the desired results.