Challenges with Implementing Legally Binding Minimum Support Price (MSP)
The proposal for a legally binding MSP for crops is considered both narrow and potentially harmful. It fails to address critical factors such as climate-induced production shocks and the necessity of aligning agricultural production with evolving dietary needs.
Alternative Policy Instruments
- Income Support and Price Deficiency Payments
- These methods ensure stable rural incomes and diversify production.
Proposed Policy Measures
- Quasi-Universal Basic Income (q-UBI)
- Suggested by Arvind Subramanian, extends PM-Kisan beyond cultivators.
- Should be higher than PM-Kisan payouts to cover price and quantity shocks effectively.
- Price Deficiency Payments
- Compensate farmers for price drops, maintaining market discipline.
- Example: Compensating 30% of average loss when crop prices fall drastically in a district.
Market Intelligence System
A robust system is necessary to handle extreme price fluctuations, signaling when farmers should switch crops or consider alternative livelihoods.
Public Procurement Evolution
- Expanded Procurement Portfolio
- Reflects changing demand patterns for the Public Distribution System (PDS) and other welfare schemes.
- Fiscally Responsible States
- States should minimize wastage, with the Centre providing subsidies only for crops used in welfare programs.
Strategic Reserves
The Centre should expand reserves to include a variety of essential crops to protect consumers from price shocks.
Conclusion
The push for a legally binding MSP results from longstanding neglect of farmers' issues, such as inadequate crop insurance and price suppression. Nonetheless, focusing solely on MSP risks overlooking broader policy solutions. The proposed integrated framework promises a more sustainable, equitable support system for farmers, ensuring dynamic agricultural markets and future-ready policies.
