Ensuring Remunerative Prices (MSP) to Farmers: Challenges and Way Forward

In the Union Budget 2018, the Government of India, accepted the long-awaited demand of the farmers to fix the minimum support price (MSP) at 1.5 times more than the cost of production Rise in MSP appears to be a welcome step towards increasing farmers’ income, however, there are several issues involved in implementing this hike in the support prices.

In this backdrop, to discuss issues surrounding MSPs, various market instruments, institutional arrangements, and the role of trade policies for better agricultural prices, IFPRI in partnership with the National Academy of Agricultural Sciences (NAAS), and Indian Council of Agricultural Research-National Institute of Agricultural Economics and Policy Research (ICAR-NIAP) organized a policy dialogue on “Innovations in Ensuring Remunerative Prices (MSP) to farmers: Challenges and Strategies”.

The dialogue was attended by many eminent economists, agriculture scientists, policy makers, development partners and experts from the field. Chief guest, Rajiv Kumar, Vice Chairperson, NITI Aayog emphasized that addressing farm distress with the right policies is now a priority for the Indian government. “We in the NITI Aayog and the government have decided that we must focus on farmers and farmers’ distress…that’s a real issue which is beginning to haunt us... and (the issue is) so amazingly complex” said Kumar. On ensuring remunerative prices to farmers Kumar added “We need mechanisms like Market Assurance Scheme, price deficiency payment systems and private participation in stockers scheme. In addition to these the non-farm sector needs to grow in order to enhance the income of small and marginal farmers”.

Chairing the panel discussion on new MSP, Ramesh Chand, Member, NITI Aayog said, “there are two important changes announced by the current government-one, changing the formula of calculating MSP leading to its increase, and second, to ensure implementation of this increased MSP. I find the second one more important, as merely announcing a higher price alone will have no benefit”. He further said that the new MSP will have huge positive impact on farmers’ income and will help in achieving the nation’s vision of doubling farmers’ income by 2022.

Supporting the government’s policy on increasing agriculture income, Shenggen Fan, Director General IFPRI, mentioned that doubling famers’ income is the most welcoming step for India.

Stressing on the developing innovative ways to ensure remunerative prices to the farmers IFPRI-SAO director, PK Joshi, said “Hike in MSP should be supplemented with effective implementation mechanisms to increase in farmers’ income. There are many challenges involved in this such as how to implement the higher MSP for all the crops.”

Emphasizing the need to focus on ensuring remunerative prices to farmers, panellist Purvi Mehta-Bhatt, senior adviser and head of agriculture for South Asia, Bill & Melinda Gates Foundation (BMGF), India, said the current educational system focuses on agricultural productivity and yields but not on farmers’ incomes, leading to an imbalance in the way success is measured in the farm sector. “Green revolution’s focus was more on the farm, the new ambition is to focus on farmers, and doubling their incomes,” said Mehta-Bhatt.

Chairperson, Trilochan Mohapatra, secretary, Department of Agricultural Research and Education (DARE) and director general, Indian Council of Agricultural Research (ICAR) expressed concerns regarding some of the structural deficiencies, which impact food security in the country. “Is the subsidized food grain (through public distribution system) not reaching the end user? Why does hunger exist? Why are we not able to reach the unreached?”. He emphasized on the need to analyse if there is a difference between the MSP of the produce and the actual price realized by the farmers.

In his concluding remarks Joshi said, “Apart from new institutional arrangements, collective action through better utilization of farmer producer organizations (FPOs), self-help groups, and contract and cluster farming can be some of the effective measures to ensure MSPs to farmers”.

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