All that's wrong with the MSP regime

After the historical success of the farmers’ movement that led to the repeal of three farm laws, farm leaders have demanded that the central government legalise minimum support price (MSP), the minimum floor price at which the government procures crops from farmers. Presently, MSPs are notified for 23 crops, but procurement is done for wheat and paddy, which meets the requirements of the public distribution system (PDS).

What ails the MSP regime? A survey by the government showed that less than 6%, or over nine crore agricultural households, are the direct beneficiaries of this programme. In 2019-20 alone, three states — Punjab, Haryana and Madhya Pradesh — accounted for 85% of the wheat procurement. In the case of paddy, over 74% of the procurement comes from Punjab, Haryana, Telangana, Andhra Pradesh, Chhattisgarh and Odisha. Of the total paddy produced in the country, only 24%, and 20% of wheat is sold under MSP. Further, only 19% of farmer families sold paddy under MSP, whereas only 9.7% of wheat farmers benefited from MSP.

Obviously, the reach of MSP is very limited. It is restricted to certain regions that produce wheat and rice. The MSP is biased against 70% of rainfed farmers who grow millets, oilseeds, fruits and vegetables. This has led to a distortion in cropping patterns, not only affecting food crops but also impacting the edible oil sector, forcing us to spend huge amounts on imports.

The dumping of foodgrains procured under MSP through PDS has had a negative impact on farmers who grow rainfed crops, leading to the erosion of crop diversity that is essential for food security in the diverse ecological zones in India. With an annual expenditure of 2.53 million rupees on MSP, questions were raised about its effectiveness. In 2015, a committee was set up under the chairmanship of former Himachal Pradesh chief minister Shanta Kumar to study MSP and suggest reforms. This led to the infamous new farm laws that stand repealed.

Centralised procurement and storing is one of the biggest challenges of the MSP regime. This not only adds to overhead costs but also leads to a high percentage of wastage as grains rot in warehouses due to inadequate storage facilities. Tropical climate and humidity also play havoc, which makes it difficult to store foodgrains for longer periods.

Criticising the MSP regime in 'India’s Quest for Sustainable Farming and Healthy Food', Bharat Dogra and Kumar Gautam say that elaborate MSP regimes may give temporary profits to well-to-do famers and agribusiness companies, but excessive application of chemical inputs will lead to the loss of soil health, destruction of natural pollinators, excessive extraction of water and reliance on monocultures that will eventually begin to collapse in the long run. This is already a reality in many parts of Green Revolution areas in Punjab, Haryana and eastern Uttar Pradesh. Legalising MSP, as demanded by the farmers' movement, will further accelerate the crisis rather than attempting to provide an alternative of crop diversification or protective mixed farming systems that rebuild soil fertility and protect biodiversity, which is essential to mitigate the impact of climate change.

In order to address these issues, the best option is to reform the MSP to make it more decentralised and within the reach of the farming community. In reality, the subsidies incurred to store and transport over long distances add to the costs with deteriorating nutritional quality, adding to the food miles. The only way to address this issue is to initiate policy changes to procure at the village level from small and marginal farmers.
We also need to allocate funds to build basic infrastructure in rural areas like roads, warehouses and boost the capacities of local institutions to handle the entire decentralised procurement and distribution process. This initiative will face multiple challenges, but in the long run, it will provide a sound basis for rural economic resurgence, paving the way for sustainable farming and providing nutritional security to a large number of people.

The Deccan Development Society based in Telangana's Medak district has already tried to implement a decentralised PDS system. It collected locally-grown food crops of different millets in semi-arid, rainfed regions. This not only achieved nutritional security but also fodder and firewood security that is based on zero emission, while addressing the issue of climate change and conserving biodiversity.

The deadlock between farm leaders and the government is focused on cosmetic reforms of the MSP regime rather than addressing the root causes of cultivating monoculture crops that has led to an ecological catastrophe. Both the government and farm leaders need to engage in long-term dialogues to reform the MSP regime. Together, they need to evolve a strategy that is able to provide assured income to farmers through crop diversification and addressing the ecological issues to sustain the basic capital of soil and water that provide nutritional security in the times of climate crisis.