Benefits of the MSP

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.