Make MSP policy SDG-conscious

India faces a pivotal moment for impactful policymaking, aligning Minimum Support Prices (MSPs) with Sustainable Development Goals (SDGs). The historical MSP framework, focused on conventional agriculture, has played a detrimental role in the worsening agrarian crisis and fueled the ongoing farmer unrest. Goals 1, 2, and 13 of the SDGs addressing poverty, sustainable agriculture, and climate action, respectively, are seriously off track. Emerging evidence supports transitioning to regenerative agriculture at the nexus of MSPs and SDGs.

Zero-Budget Natural Farming (ZBNF) with traditional seeds for drought- or deluge-resistant crops reduces costs and minimises risks, ensuring financial security for farmers. Multicropping allows farmers to weather disasters in a way that eludes monocropping, thereby enhancing climate resilience in agriculture while contributing to a more nutritious food supply. Carbon dioxide removal (CDR) from the atmosphere and sequestration in soil with agroforestry and regenerative farming methods is an urgent ecological service worthy of compensation, further benefiting the poorest segments of India’s population. 

Policymakers have been studying the linkages of MSPs with SDG 1 ever since MSPs were introduced in 1966–67 and with SDGs 2 and 13 close to a decade ago, almost as soon as they came into effect with the Paris Agreement. Proposals for integrating payment for ecological services (PES) into agricultural costs have been advocated by experts and previous commissions. The 2016 publication from the Chief Economic Adviser, Government of India, titled “Incentivising Pulses Production Through Minimum Support Price (MSP) and Related Policies,” urged the Commission on Agricultural Costs and Prices (CACP) to review its MSP-setting framework to incorporate risk and social externalities. The report highlights the need for policies to account for negative externalities—overuse of inputs leading to water table depletion, increased disease incidence, soil erosion, and environmental degradation—arising from the procurement focus on paddy and wheat in conventional agriculture. In particular, recognising pulses’ ecological benefits, the report emphasises their lower negative externalities and higher positive externalities—nitrogen fixation for soil nutrient replenishment.

Calculations in the report reveal an average benefit of cultivating pulse (tur) of approximately Rs 20 per kg when it substitutes irrigated paddy in Punjab. Admittedly conservative on externalities, the report did not include the further positive externality of soil-based carbon sequestration through regenerative farming, yielding a CDR of about 2 tCO2e/ha/year. Considering the social cost of carbon, almost $200/tCO2e, and rising, this CDR warrants a PES of $400/ha/year (see ‘Soil as Carbon Sink,’ DH, Dec 20, 2023). At a pulse yield of approximately 1,500 kg/ha, this ecological service translates to a benefit of Rs 22/kg. Consequently, SDG-conscious MSPs for pulses farmed with regenerative agriculture should be much higher than those for their conventional counterparts. Among the nearly two dozen crops nominally covered by MSPs, most show higher returns, improved climate resilience, and achieve comparable CDR under regenerative agriculture practices.

MSPs play a crucial role in achieving key SDGs, akin to a company boosting its stock price through share buybacks. In theory, a farming corporation too could adjust its clearing price in agricultural markets with a farm produce buyback. Such a large private player, however, does not exist in Indian agriculture, where the average land holding is about one hectare. Therefore, farmers are unable to adjust the quantity of produce brought to market, which leads to a very low price elasticity of supply. The farming community needs the central government in order to accomplish their version of the share buyback, the MSP. It would not be necessary for the central agency to procure all produce to achieve superior supply elasticity; it only needs to procure at the margin. Some farmers’ unions seek this guarantee through an Act of Parliament; after all, the 2016 externalities cognizant MSP-setting framework from the Chief Economic Advisor has not been implemented.

The unsustainability of conventional agriculture—increased dependence on more chemical inputs, land degradation, water scarcity, and constantly rising pre-harvest sunk costs that outpace all subsidies—continues to exacerbate the agrarian crisis that ensnares farmers in debt cycles, circular migration, marginalisation, and suicides. It is clear that past MSPs aimed at solely sourcing from conventional agriculture are anti-SDGs. Perversely, they trap agriculture on a path that ruins the livelihoods of the vast majority of farmers. Instituting a dual-sourced MSP framework that preferentially procures produce from natural farming at suitable price differentials provides farmers with a strong incentive to adopt and is crucial for a just transition. Aligning the frameworks for MSPs and SDGs around regenerative agriculture offers a unique policymaking opportunity.

(The writer is a former faculty at leading B-schools in India, Singapore, and the US.)