Minimum Support Prices for Agricultural Produce

Tackling agricultural reforms after farm laws repeal

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Need for reforms in agriculture

Context

In the run-up to the repeal of the three farm laws, the potential cost of MSP to the taxpayers became a matter of debate.

Issue of MSP

  • Large variation: Experts and agricultural economists quoted numbers about the cost of MPS.
  • There is a large variation in the quoted numbers.
  • The enormity of the variance in estimates is astounding.
  • No consensus on the number of beneficiaries of MSP: There is also a dissonance between the NSSO data and the administrative data on the number of farmers who enjoy MSP.
  • No consensus on a formula to calculate MSP: Further, there is no consensus on the formulae for the calculation of MSP.

Suggestions on land reforms

[1] Reduce high domestic prices

  • That India is an agri-surplus country.
  • That domestic prices of agri-commodities are often higher than in the international market and therefore, there is a need to bring them down.
  • How to achieve cost reduction: Cost reduction can happen either by creating efficiencies by plugging leakages or, by cost-cutting — including reducing farmers’ margins.
  • In the recently-reached understanding with the farmers, the government has agreed to constitute a committee on MSP.
  • Hopefully, a formula can be arrived at by which costs of domestic agricultural produce can be reduced while ensuring a “remunerative price” for the farmers.

[2] Protecting landholdings

  • There is also a need to protect landholdings.
  • Farmers’ fears in this regard are not exaggerated.
  • Under the erstwhile laws, orders of payment made by an SDM/Collector could be recovered as “arrears of land revenue”.
  • While agricultural lands were protected from such recovery, non-agricultural (immovable and movable) assets appeared to be fair game.
  • Further, circumstances such as sustenance and payment of debts could force a farmer to sell their agricultural landholdings.
  • Large-scale loss of landholdings could lead to their consolidation in the hands of a few.
  • This could have the impact of turning the clock back, reminiscent of the Zamindari system.

[3] Need to reconsider the dispute resolution mechanism

  • The government should also reconsider the dispute resolution mechanism provided in the erstwhile laws.
  • In an MSP driven regime, the government is likely to be a party in any potential dispute.
  • Conflict of interest: There will be a direct conflict of interest since the SDM/Collector is an arm of the government.
  • Land records are within the jurisdiction of the patwari and tehsildar, who report to the SDM/Collector.
  • Fast track courts: It would be advisable to think in terms of fast-track courts, and remove the provision of recovery through arrears of land revenue.
  • It would also be advisable to have only one dispute resolution mechanism for all farm laws.

[4] Avoid over-corporatisation without the creation of the requisite efficiencies

  • We should not ask our farmers to brave corporatisation without levelling the playing field and enough jobs in the non-agricultural sector.
  • Over-corporatisation without the creation of the requisite efficiencies could lead us to become heavily import-dependent, killing the benefits of the Green Revolution.

Conclusion

Perfunctory reforms and those that don’t work for all constituents — corporates as well as farmers — could have long-term deleterious effects for not only the agricultural sector, but the economy as a whole.

UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments