Farmers Protest

Syllabus: GS3   > Agriculture   >   Storage, transport & marketing   >   Minimum Support Price

REFERENCE NEWS: 

• On February 13, 2024 thousands of farmers began marching towards the national capital to push for their demands, notably the Minimum Support Price (MSP). 
• This event recalls the farmers' protest against proposed farm laws that took place in 2020-21.

FARMERS’ PROTEST 2.0

• The Dilli Chalo march, also known as the Farmers’ Protest 2.0, was organised by groups like the Samyukta Kisan Morcha (SKM) and the Kisan Mazdoor Morcha (KMM) after talks with government officials on February 12 failed. 
• The Union government, displeased with the farmers’ actions, has fortified the capital with barriers like barbed wires, concrete boulders, and shipping containers, along with imposing Section 144.
• The farmers, primarily from Punjab and Haryana, have been mobilizing for these protests, indicating the ongoing concerns within the agricultural sector regarding government policies and their impact on farmers' livelihoods?.

WHAT ARE THE DEMANDS OF THE FARMERS?

The demands of the farmers in their 12-point agenda include:

• Law to guarantee Minimum Support Price (MSP):
  • The headline demand in the farmers’ 12-point agenda is for a law to guarantee minimum support price (MSP) for all crops, and the determination of crop prices in accordance with the Dr M S Swaminathan Commission’s report. 
  • MSP is a government policy mechanism without a legal guarantee for all crops it covers. 
  • The demand for an immediate legal guarantee for MSP on all crops reflects the farmers' call for a more robust and enforceable system that ensures they receive a minimum price for their produce, regardless of market conditions. The legal guarantee for MSP is sought to be institutionalized so that it becomes a statutory right for farmers, rather than a discretionary policy measure by the government.

MSP and Dr M S Swaminathan Commission’s recommendation: MSP for major agricultural products is fixed by the Department of Agriculture and Co-operation, Government of India, before the sowing season each year. The prises are fixed on the basis of recommendations of the Commission for Agricultural Costs and Prices (CACP).  CACP calculates cost of production at three levels: A2, which includes cost of inputs such as seeds, fertilizer, labour. A2+FL, which includes the implied cost of family labour (FL). C2, which includes the implied rent on land and interest on capital assets over and above A2+FL. National Commission of Farmers also known as the Dr M S Swaminathan Commission (2004) recommended that the MSP should at least be 50 per cent more the weighted average cost of production, which it refers to as the C2 cost. However, since 2018, MSPs is fixed at 1.5 times of the A2+FL production cost. To read more on Minimum Support Price (MSP): https://ilearncana.com/details/Minimum-Support-Price-MSP/4928

• Full debt waiver for farmers and labourers to relieve them from the burden of loans and financial stress.
• Implementation of the Land Acquisition Act of 2013, with provisions for written consent from farmers before acquisition, and compensation at four times the collector rate.
• Punishment for the perpetrators of the October 2021 Lakhimpur Kheri killings, seeking justice for the victims and their families involved in the tragic incident.
• Withdrawal of India from the World Trade Organization (WTO) and a freeze on all free trade agreements, aiming to protect domestic agriculture from global market pressures and unfair competition.

• Pensions for farmers and farm labourers, ensuring financial security for them in their old age.
• Compensation for farmers who died during the Delhi protest, including a job for one family member.
• Scrapping of the Electricity Amendment Bill 2020, addressing concerns about its impact on farmers' electricity costs and access.

• Extension of employment under MGNREGA to 200 days per year (up from 100), with a daily wage of Rs 700, and linking the scheme with farming activities to provide more work opportunities and better wages for rural labourers.
• Strict penalties and fines on companies producing fake seeds, pesticides, and fertilizers; also, improvements in seed quality to ensure farmers have access to reliable and effective agricultural inputs.
• Establishment of a national commission for spices such as chili and turmeric to support spice growers and promote the spice industry in India.
• Ensuring rights of indigenous peoples over water, forests, and land, protecting their traditional livelihoods and access to natural resources.

GOVERNMENT’S RESPONSE:

• In the fourth round of talks with farmer leaders, the Centre proposed a minimum support price (MSP) on three pulses, maize and cotton through cooperatives for five years.
• The proposal outlines that government agencies like NCCF and NAFED will buy maize and pulses (Arhar, Urad, and Moong), and CCI will purchase cotton at MSP rates set by CACP.
• Farmers and these agencies will enter into 5-year legal contracts for crop procurement.
• Highlighting concerns about desertification in Punjab due to water depletion, the proposal discusses diversifying to pulse cultivation to conserve water, improve soil health, reduce imports, and increase farmer income.
• However, the protesting farmers' decided to continue their ‘Delhi Chalo’ march on February 21 as they rejected the government proposal. 
• The farmer leaders said that after deliberations within their organisations, they have found that the proposals are not in favour of farmers. They also said that the government is not ready to clarify whether the MSP they proposed is based on A2 + FL + 50% or C2+50%. 

POTENTIAL BENEFITS OF THE LEGALISATION OF MSP:

• Income Security for Farmers: 
  • Legalizing MSP ensures a minimum price for crops, providing farmers with income stability and protection against market price fluctuations. This can lead to increased investments in agriculture. Eg: India's wheat and rice farmers benefitting from MSP, leading to consistent income despite market variations.
• Encouragement of Agricultural Investment: 
  • Guaranteed prices encourage farmers to invest in advanced farming techniques and technology, enhancing productivity and quality. 
• Rural Economic Development: 
  • Stable farmer incomes stimulate rural economies, boosting spending and job creation in agriculture, services, and industries. Eg: Enhanced rural markets and job opportunities in agro-processing units in MSP-supported areas like Punjab, Haryana etc.
• Reduction in Farmer Distress: 
  • MSP acts as a safety net, mitigating financial risks and reducing instances of indebtedness and extreme distress among farmers. Eg: Lower suicide rates among farmers in areas with effective MSP implementation.
• Support for Sustainable Farming Practices: 
  • Guaranteed income encourages the adoption of eco-friendly farming methods, benefiting soil health and the environment. 
• Food Security:
  • MSP supports the financial viability of farming, ensuring the production of staple crops and contributing to national food security. Eg: Consistent production of rice and wheat in India under MSP, ensuring food availability.
• Stabilization of Food Prices: 
  • MSP prevents excessive fluctuations in food prices, protecting both farmers and consumers from price volatility. Eg: Stabilized prices of essential commodities like pulses and oilseeds under MSP, preventing price spikes.
• Boost to Agro-based Industries: 
  • A predictable supply of agricultural raw materials benefits industries like textiles and food processing, promoting expansion and stability. Eg: Reliable supply chains for cotton and sugarcane supporting textile and sugar industries, respectively, due to MSP.

CHALLENGES OR CONCERNS ASSOCIATED WITH THE LEGALISATION OF MSP:

• Financial Implications for the Government: 
  • Legalizing MSP could significantly increase the government's fiscal burden. Ensuring MSP for a wide range of crops would require substantial financial resources for procurement, storage, and management of the surplus produce. This could strain the government's budget and potentially divert funds from other critical sectors.
• Market Distortions: 
  • Setting MSPs higher than market prices might lead to market distortions. It could encourage overproduction of certain crops, leading to surplus stocks that the government must manage. This surplus could disrupt market dynamics, affecting supply and demand balance.
• Impact on Crop Diversification: 
  • A legal guarantee of MSP might result in farmers favoring the cultivation of crops under MSP over others, potentially leading to monoculture practices. This could hinder crop diversification efforts and impact soil health and biodiversity negatively.
• Quality Concerns:  
  • With a guaranteed MSP, there might be less incentive for farmers to maintain or improve crop quality, as the focus might shift towards quantity to maximize income under the MSP regime. 
• Implementation Challenges: 
  • Ensuring a legal guarantee of MSP across the country involves complex logistics, including procurement, storage, and distribution. 
• Inflationary Pressures: 
  • The increased government spending required to support MSP procurement could have inflationary effects on the economy. This could lead to higher prices for consumers, impacting the cost of living.
• Equity Concerns:  
  • A legal MSP might benefit land-owning farmers more than landless laborers or small and marginal farmers who have less produce to sell. This could exacerbate existing inequalities within the agricultural sector.
• Global Trade Implications: 
  • Legalizing MSP could also have implications for India's trade relations. It might be seen as a distortionary trade practice under WTO rules, potentially leading to trade disputes and affecting India's export markets.

WAY FORWARD:

• Inclusive Policy Making: Engage farmers and their representatives in policy-making with government and experts via dialogue platforms.
• Review of MSP System: Conduct a comprehensive review of the MSP system, considering the Dr. M.S. Swaminathan Commission's recommendations, to explore a legal MSP guarantee while assessing fiscal implications and avoiding market distortions.
• Diversification and Sustainability: Promote diversification and sustainable farming to reduce water-intensive crop reliance and improve soil health, including pulse cultivation.
• Infrastructure and Technology: Invest in agricultural infrastructure and technology upgrades to enhance storage, reduce post-harvest losses, and improve supply chain efficiency.
• Financial and Risk Management: Expand financial and risk management tools like crop insurance and favourable credit facilities to mitigate farming risks.
• Legal and Regulatory Frameworks: Review and potentially revise agriculture-impacting laws like the Land Acquisition Act and Electricity Amendment Bill to address farmer concerns.
• Global Trade Challenges: Navigate global trade agreements to protect Indian farmers' interests, ensuring favourable terms and international compliance.
• Educational and Extension Services: Strengthen services to update farmers on sustainable practices, market trends, and technology through digital platforms.
• Monitoring and Evaluation: Establish mechanisms for on-going policy and program evaluation, allowing for timely adjustments based on feedback and changing conditions.

PRACTICE QUESTION:

Q. Explain how the Minimum Support Price (MSP) is calculated, with reference to the Dr. M. S. Swaminathan Commission's (2004) recommendation regarding the same. Also discuss the potential benefits and challenges associated with the legalisation of MSP in India.(15 marks, 250 words)