Is MSP a Savior or Destroyer?

What this document covers:

• What is MSP?
• Impact of MSP on small and large farmers.
• Changing cropping pattern due to MSP.
• Environment and other issues.

What is MSP?

• MSP stands for minimum support price.
• Basically, MSP is a price set by the government for certain agriculture products to protect farmers from sudden fall in prices due to bumper production.
• Generally, MSP is announced during the sowing season so that farmers can take better decision regarding their crops.
• MSP is announced twice in a year for Kharif crops in June and for Rabi crops in October by the Cabinet Committee on Economic Affairs (CCEA).
• Though MSP is an important policy instrument to protect farmers from crop loses but it has also resulted in distorting the market and leading to overproduction.

Impact of MSP on small and big farmers.

• The average land holding size in India is less than 2 acres, which means majority of farmers are small farmers.
• Only 10% farmers are rich farmers and 20% of the farmers are middle farmers.
• Around 40-50% of agriculture produce goes for subsistence in case of small farmers hence their earning from MSP is very less when compared to the rich farmers.
• Also it has been highlighted in the study of NABARD that the average income of small farmers from MSP is about 30% lower than the average income of big farmers due to reasons like lack of storage facilities, transportation and labour charges.
• Though MSP is announced for a variety of crops but government may or may not procure all the crops hence there is always a risk for small farmers as they do not have facilities to carry and store the crop.
• It would not be wrong to say that big farmers are the real gainers from the MSP. Small farmers has also benefitted but the benefit is more in the form of protection from price shock rather than raising the living standard of the small farmers (this is because of small land holding).

Changing cropping pattern due to MSP.

Crops covered by MSPs include:

• 7 types of cereals (paddy, wheat, maize, bajra, jowar, ragi and barley),
• 5 types of pulses (chana, arhar/tur, urad, moong and masur),
• 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower, nigerseed),
• 4 commercial crops (cotton, sugarcane, copra, raw jute).

• The MSP has also led to overproduction of some crops, such as wheat and rice. This is especially true in the states of Punjab, Haryana, and Uttar Pradesh, which are major producers of wheat and rice.
• The MSP for pulses and oilseeds is lower than the market price, which has led to a decrease in the cultivation of these crops. This is especially true in the states of Madhya Pradesh, Rajasthan, and Gujarat, which are major producers of pulses and oilseeds.
• These changing cropping patterns are putting a stress on the water resources of our country as water intensive crops are being grown in areas where water is scare.
• India needs diversification of crops so that important natural resources like water can be preserved for future generations.

Environment and other issues.

• The increase in the cultivation of water intensive crop has put a stress on the water resources of the country.
• Waterlogging due to irrigation leads to increasing soil salinity. This will decrease the productivity of soil and the soil may turn infertile in long run.
• Even the economic survey of India has stated that increasing soil infertility is a major threat to the food security of India. Soil infertility can be avoided by cultivating crops that are suitable to the natural environment of that region.