Daily News Analysis:-

Cost of legal protection to farmers income and consumers interests has been greatly exaggerated

GS3: MSP

Apprehensions of legalizing MSP

1. Monopoly of Government and missing out of market
2. Fiscal costs in terms of debts

These apprehensions were also felt while enacting NFSA and MGNREGA, however they turn out to be lifelines during pandemic.

Fear busting regarding legalizing MSP

Fear: Government should procure all crops with pre pre-decided MSP. Hence, the government should incur 10-18 lakh crore.

Busters:

1. Governments’ fractional purchasing of crops would accelerate the demand. It exceeds market prices of the crops more than MSP.

○      Therefore, farmers themselves become reluctant to sell to the government.

2. Government is obliged to buy the crops only when prices fall below MSP and not always.

• When market prices are above MSP, farmers will sell it to the market itself.
  • Example: In 2022, the target of the government buying is 44 million tonnes, but the government provided only 22 million tonnes.

Subsidy to farmers or consumers?

Government is providing subsidy only to consumers and not to farmers. To discharge its obligation under NFSA, government is buying from farmers by paying minimum value to farmers fir their hard earned produce.

Prominence of procuring crops beyond requirement

Governments face losses only when it provides for NFSA due to the significant difference between purchasing price and issue price.

• Crops purchased beyond limits are being sold at market prices in domestic and international markets causing profits to the government.
• Government selling at markets also cools down the volatility.  Eg: Open market selling by FCI.

Storage system to manage natural resources

Obligation from the government will lead to creation of storage systems across India, hence, helps to protect our natural resource that is agri-produce.

• These can be used by farmers cooperatives, government purchasing is less.

MSP and Inflation management cost estimation

Government incurs more money to manage inflation driven by food price volatility. Government can buy from farmers instead which create demand in the rural sector as well as ensures price stability.

MSP to drive sustainability

Extending MSP to organic crops will fasttrack promotion of organic agriculture and behavioral changes will be visible.

Thus government should weigh in all benefits rather than plainly focusing on fiscal costs to consider upon legalizing MSP.