CEA for phasing out minimum support price

Says MSP cannot remain forever, should have expiry

CEA for phasing out minimum support price

After stirring up a debate on Universal Basic Income, Chief Economic Adviser Arvind Subramanian on Wednesday suggested phasing out of Minimum Support Price (MSP) for farmers.

But Subramanian admitted that politics in India was not yet mature to do that. MSP is a kind of market intervention through which the government insures agricultural producers against any sharp fall in farm prices.

“MSP came into being because of our lack of self-sufficiency in food grains. We had Green Revolution and in addition we wanted to incentivise production of some food grains. But, the problem with all these policies is that they should not remain forever. There must be an expiry date,” Subramanian said at a discourse at the Vidhi Centre for Legal Policy here.

The CEA said the time has come when India needed to have a mature political discussion on MSP.

He said even the current form of MSP has led to distortions as it is not applicable to a few crops. “We have MSP that works for cereals. So there is a big disparity in the way the de facto policy favours some cereals and does not favour others...So there is a way to rectify. Get rid of MSP...and provide incentives through other means of technological research etc., But politics is such that it is always difficult in India to get rid of what you have started,” he said.

Record foodgrain production
Beating apprehensions of a slowdown due to demonetisation, the Centre on Wednesday pegged India’s foodgrain production at a record 271.98 million tonnes for 2016-17, DHNS reports from New Delhi.

According to the second advance estimates released by the government, production of rice, wheat, coarse cereals, pulses and oil seeds is expected to shatter previous records, mainly on account of a good monsoon.

The overall production is 20.41 million tonnes higher than last year’s 251.57 million tonnes, a decline that was due to the second consecutive drought in large parts of the country.
 

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