Why Punjabi farmers desire legal MSP and the reasons behind the complexity of their demand are explained

NEW DELHI: Just over two years after they put an end to their 16-month-long protest in the nation’s capital, hundreds of farmers, mostly from Punjab, have taken to the streets once again to pressure the government to fulfill their long-overdue requests.

Farmers’ protests came to an end in 2021 when the center retracted the three contentious agricultural regulations that had been the major point of conflict between the two parties.
They also sought a legislative assurance that all crops would be purchased at the minimum support price (MSP), but they reached a deal when three laws were repealed and threatened to reappear if the remaining demands were not met.

This time, the main demand of the protesting farmers is the legal guarantee of MSP according to the Swaminathan Commission formula.
To break the deadlock, Centre will have further negotiations with farmer unions on Thursday.
Why MSP is still a difficult problem

The minimum price that the government pays farmers when acquiring any produce from them in order to shield them from price volatility is known as the MSP.
After determining the cost of cultivation, the state-run Commission for Agricultural Costs and Prices (CACP) announces the prices of around 22 crops each year.

The primary state-run grain procurement organization, Food Corporation of India (FCI), mostly purchases wheat and paddy at these rates. The FCI is then reimbursed by the Center for its losses after selling these foodgrains to the underprivileged at heavily discounted costs.

Seven cereals (paddy, wheat, maize, bajra, jowar, ragi, and barley), five pulses (chana, arhar, moong, urad, and masoor), seven oilseeds (groundnut, soybean, rapeseed-mustard, sesame, sunflower, niger seed, and safflower), and four commercial crops (sugarcane, cotton, copra, and jute) are among the crops for which the Center releases MSPs each year.

Why farmers in Punjab and Haryana are impacted

Farmers in Punjab and Haryana have long demanded the legalization of MSP since they typically get the greatest benefits from procurement via this system.

According to official statistics, Punjabi farmers continue to be the primary gainers from the MSP-based purchase of wheat and rice. Punjab received an MSP outflow of more than Rs 19,300 crore for wheat during the 2022–2023 rabi marketing season. On the other hand, the MSP outflow for paddy during the 2021–22 Kharif marketing season was Rs 36,708 crore.

Historical data indicates that farmers in Punjab and Haryana sell a significant amount of their grain production via the government procurement mechanism.
Furthermore, farmers in Punjab and Haryana anticipate higher agricultural returns than some of their southern counterparts since they benefited greatly from the Green Revolution in the 1960s and 1970s.

Justifications for and against MSP
But since MSP is an administrative system, prices that farmers get are often based on supply and demand. Historically, MSP has focused on wheat and paddy because of the government’s extensive grain storage facility, which makes the public distribution system easier to operate.
However, farmers in these areas worry that they won’t be paid fairly for their products if MSP isn’t supported by the law—especially if market prices drop below MSP.

Farmers see an MSP safety net as a means of protecting themselves against changes in market prices and unpredictability in agricultural output. Small and marginal farmers, who depend on agriculture as their only source of income and spend months planting and harvesting a crop, particularly benefit from it.

However, the government and a number of experts claim that the legalization of MSP may not be viable because of a number of obstacles, including a deficient infrastructure for stock purchases, the possibility of stock waste, skewed cropping patterns, and a lack of efficient market access.
Government representatives also noted that the MSP’s implementation would be a financial nightmare. They said that the market value of crops covered by the MSP regime was estimated at Rs 10 lakh crore, whilst the value of agricultural production in the nation for FY20 was set at Rs 40 lakh billion.

Thus, very little money would remain to pursue other development and social aims if the Center’s complete spending of Rs 45 lakh crore (for 2023–2024) was used to purchase this worth of output.
MSP-based procurement may also lead to overproduction of certain crops and skew market pricing, which makes distribution and storage issues worse.

According to a paper published in PRS Legislative Research, MSP procurement does not encourage farmers to grow other goods like pulses, and it skews crop output in favor of wheat and rice, especially in states with high levels of procurement.

Given that it won’t have an impact on markets and would benefit all growers, some experts believe that direct income assistance for farmers would be a preferable solution than MSP. Other options exist as well, such as the government covering the price discrepancy between the MSP and the farmers’ selling price. MP and Haryana have previously experimented with a similar program.
broader discussions
Farmers have received assurances from Center that “structured” talks over the MSP problem are forthcoming.

Arjun Munda, the union minister of agriculture, said that all interested parties must be consulted before rushing to pass legislation ensuring MSP on commodities. “Humein MSP ke baare mein kanoon kis tarah banana hai aur ismein kya labh aur kya nuksaan hai yeh dekhna hai.” (On MSP, we need to determine the best course of action and the advantages and disadvantages of enacting a legislation),” Munda said on Tuesday.

The minister said that during the conversation with the farmers who were protesting, the farmers were asked to join a new committee or the Sanjay Aggarwal-led group that is currently investigating ways to improve the MSP system.

In July 2022, the panel led by Sanjay Aggarwal on MSP was formed, eight months after the government had committed to do so while pulling the three controversial agri-laws. It has conducted 37 seminars and meetings so far.