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Focusing on the Genuine Challenges Confronting India's Agricultural Sector

Published On Thu, 14 Mar 2024
Arnav Khanna
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Once again, certain farmer groups have initiated protests, a little over two years after their previous agitation around Delhi, which concluded with the repeal of three controversial farm laws. This time, their primary demand is the revision and legalization of the minimum support price (MSP) for crops. Annually, the Union government sets Minimum Support Prices (MSP) for 22 mandated agricultural crops and Fair and Remunerative Price (FRP) for sugarcane, based on recommendations from the Commission for Agricultural Costs and Prices (CACP).
However, this procurement is limited to a total of 23 crops, primarily focused on paddy and wheat, benefiting only a small percentage of farmers and excluding many states. Procurement is managed by the Food Corporation of India (FCI) and state agencies, where eligible food grains are purchased at MSP. Additionally, oilseeds, pulses, and copra of fair average quality (FAQ) are procured under the PM-AASHA scheme from registered farmers at MSP when market prices fall below MSP.
However, the benefits of MSP are unevenly distributed across the country. For instance, in Bihar, where the Agricultural Produce Marketing Committee (APMC) Act was revoked in 2006, farmers sell their produce to the state-run Primary Agriculture Credit Society (PACS) at MSP. Nevertheless, procurement by the PACS remains minimal in Bihar, prompting farmers, and even some intermediaries, to travel to Punjab annually to sell wheat and paddy in mandis. This practice exacerbates regional disparities.
Moreover, food subsidy constitutes a significant portion of the Department of Food and Public Distribution's total expenditure. Subsidies play a crucial role in safeguarding farmers against market price declines and providing consumers with affordable food grains through the Public Distribution System (PDS). Despite the agricultural sector's substantial contribution to India's gross value added (GVA) and employment, it has been grappling with challenges for a considerable period. While employing more than half of the workforce, farmers' average monthly income remains relatively low.
Protesting farmers are advocating for MSP to be legally guaranteed, demanding compensation calculated at C2+50, while the government proposes a price based on A2+FL with a 1.5 increment. C2 represents comprehensive costs, including input costs and rental value of land, while A2+FL incorporates family labor expenses. However, land rentals vary by region, complicating the assessment of MSP revisions based on C2+50.
Although a government-appointed committee is currently examining MSP and other farmer welfare issues, it's imperative to address agrarian reforms comprehensively. Approximately 85% of farmers are smallholders with limited access to essential resources and markets. MSP's role in distorting cropping patterns, exacerbating inflation, and meeting WTO obligations further underscores the need for a holistic approach to tackle farm distress.
Disclaimer: This image is taken from Hindutan Times.
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