Context:
As the Union government and farmers debate over the legally assured Minimum Support Price, regarding a recent study conducted by the ICAR National Institute of Agricultural Economics and Policy Research (NIAP) regarding the unequal benefits of the Minimum Support Price.
The Limited Scope of MSP
- Only 15% of paddy farmers and 9.6% of wheat farmers avail of MSP enabled procurement.
- Small and marginal farmers, who form the majority of the country’s farming community, get disproportionately smaller benefits.
Large Farmers Dominate the MSP Procurement Part
- 31.3% of total paddy farmers and 23.5% of total wheat farmers sell in the market a big portion of their surplus through MSP.
- In contrast, only 10.5% of small paddy farmers and 4.5% of small wheat farmers are in the fold of MSP procurement.
The Productivity & Income Effects
- Farmers selling at MSP enjoy
- Yield in paddy higher by 13.5%
- Yield in wheat higher by 5%
- Better price realization for MSP than open markets
- Paddy: 13.2% price over advantage
- Wheat: 3.5% price advantage
- Total income increase
- 23.2% higher in paddy cultivation
- 9.6% income increase from wheat cultivation
Problems and Concerns
- The majority of MSP benefits are heavily skewed towards larger farmers who provide higher marketable surpluses.
- Small and marginal farmers become disadvantaged due to lack of access to procurement.
Policy Suggestions
The study recommends the following for an inclusive MSP:
- Increase in the reach of Price Deficiency Payment Scheme for price support.
- Targeted procurement of small and marginal farmers for equitable distribution.
- MSP access be widened so that all farmers categories enjoy the benefits.
