MSP Hike and related concerns

Why in the News?

Central Govt. ministries and departments recently casted apprehensions to the Union Ministry of Agriculture and Farmers’ Welfare’s proposal to hike the minimum support price (MSP) for kharif crops in the 2023-24 season.

MSP hike:

1. The cabinet approved the increase in MSP ranging from 6% to 10% as per the recommendations of the Commission for Agricultural Cost & Prices (CACP).
2. This MSP hike was in line with the Union Budget 2018-19 announcement of fixing MSP at a level of at least 1.5 times the cost of production.
3. It was intended to increase or provide reasonably fair remuneration for farmers.

Concerns regarding the MSP hike?

The Department of Expenditure in the Ministry of Finance, the Niti Aayog, and the Department of Commerce wrote to the Agriculture Ministry expressing their concerns.

1. The hike in MSP to this level will make it difficult to keep inflation in check, within the stipulated range of 4-6 per cent.

2. The entire increase in MSP recommended by CACP is on account of increase in projected cost and not actual data. The actual data shows that,
   1. Real wages in agriculture are not rising
   2. The increase in price of urea has been absorbed by the Government of India by increasing subsidies.
   3. If increase in cost of production is found to be 6-10 per cent, the recommended increase in MSP is justified.
3. The Department of Expenditure supported MSP hike provided that key non-price recommendations are also implemented.
   1. Review Open Ended-Procurement Policy which has led to consistently excessive stocks of rice and wheat with Government agencies and over-exploitation of groundwater resources and distorted cropping pattern in the Indo-Gangetic plains.
      • Predetermined targets should be specified simultaneously for procurement of crops for which MSP is announced.
   2. Special Scheme for Crop Diversification in Indo-Gangetic Plains such by providing a mechanism for better prices, appropriate incentives, supportive marketing, and procurement mechanism to farmers for other crops.
   3. Promotion of Nutri-cereals as Healthy Foods by pushing for a change in people’s eating and dietary patterns, thereby increasing the demand for healthy and local foods.

For instance, the Govt of Odisha launched a “Special Programme for Promotion of Millets in Tribal Areas” to revive millets in rainfed areas and included millets in PDS to boost its household consumption.

1. 4. Improving Crop Productivity given the burgeoning population and depleting land resources of India.
   5. Bridging yield-gap by accelerating technological dissemination and its adoption by the farmers.
   6. Promoting balanced Use of Fertilizer by regulating fertilizer pricing as the widening price differential between urea and P&K fertilizers has led to excess use of N at the expense of P&K fertilizers.
   7. Farm mechanisation to address the issue of labour scarcity and rising wages, particularly during peak agricultural season. This shall enhance competitiveness as well as farm profitability.
      • Expansion of agricultural machinery services through Custom Hiring Centres (CHCs) aids in increased mechanization on farms.

Agriculture Ministry’s rationale:

1. Increase in MSP in the range of 5.3% to 10.4% is essential to
   1. ensure remunerative prices for farmers
   2. encouraging farmers to invest more in production
   3. ensure food security in the country
   4. Higher MSP for crops such as oilseeds, pulses and Shree Anna aims to promote crop diversification
2. The Composite Input Price Index (CIPI) which is based on the latest prices of major inputs like human labour, machine labour, fertilisers and manures, seeds, pesticides and irrigation provides enough rationale for the increase in price levels.
3. A centrally sponsored scheme, ‘Sub-mission on Agricultural Mechanisation’ for promotion of agricultural mechanisation in the country is being implemented.

Source URL: Citing inflation and WTO subsidy limit, NITI, Commerce red-flagged MSP hike | Express Investigations News - The Indian Express