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3 reasons why government should retract MSP

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In the end and start of a year when New Delhi is facing bitter cold, but the raucous protests during the same period is raising up the mercury level of our leaders. Apparently the rise in temperature is a sign of comfort but the rabble is giving sleepless nights to them. On the contrary, it seems there is no sinister ploy behind the Citizenship Amendment Bill (2019) as well as in Farm Bills (2020) more or less they both are for common good.

In this article we will discuss one aspect of Farm’s Bill i.e. the Minimum Support Price famously known as MSP. MSP is now a bone of contention in the ongoing protracted protest and obvious reason behind farmers whinging. After scanning MSP system through the economics lens, it seems to be a bane to the farming sector and altogether to the whole economy. It’s promulgated on the basis of socialist ideas and we all know nothing good can happen to the economy by socialism.

As the name suggests, MSP is a minimum price fixed by the government to purchase agricultural products from the farmers. It act . Not every Agri- product comes under the umbrella of MSP but only enlisted ones nonetheless there are 23 crops.

There are three important points to ponder regarding the Minimum Support Price.

1– GOVERNMENT’S INTERVENTION IN PRICING

There should be no role of government in price fixation. India is a liberal democratic country which believes in the ethos of globalisation policy and a free market economy, where demand and supply should be the driving force behind the price of a product. But the notion of government interventation in pricing of a farm products is disgraceful in the open market structure.

When the government assures the minimum price of a crop without considering its market value it’s actually defying the economics logic. For instance the global average market price of 1 quintal wheat is Rs 1000 but the MSP set up by the government for 1 quintal wheat is 1200Rs. Without any second thought, farmers will sell their wheat to the government. So far it seems fair deal for farmers but that too at the cost of tax payers money i.e. Rs 200 per quintal. Incidentally ,our government pays more from the taxpayers money for the same crop than the global average price.

For once we as noble naive citizen can or made to bear extra cost but why on earth private and foreign investors will involve themselves in such an absurd market policy, they will simply walk- off and invest in a fair price market system. Ergo , this will hurt the export ecosystem as well as private investment in the domestic agriculture market.

Last year data revealed by Agricultural and Processed Food Products Export Development Authority ( APEDA) showed a sharp decline by over 37 percent in export of non- basmati rice. A Report published by The Print https://theprint.in/economy/cheaper-china-rice-high-msp-what-non-basmati-exporters-are-blaming-for-dip-in-trade/352510/ clarified that in the African markets, the price of quintal rice from China is Rs2,129 while the price of rice from India is Rs3,479 a quintal.

We can also say MSP is itself a massive roadblock  for two  out of three farm laws i.e.  Farmer’s Produce Trade And  Commerce ( Promotion and Facilitation Act)  and  Farmers ( Empowerment and Protection ) Agreement of Price Assurance and Farm Services Act  that was passed by parliament aiming  to attract private players.


2- ABUNDANCE OF GOVERNMENT’S PROCUREMENT

Well , it’s quite evident that no private or foreign player will purchase at more than global average cost nor the farmers will sell at low price . So most of the produce is stuck with the government for procurement. But we already procure more than the anticipated consumption resulting in overflowing of agri- food in cold storages. During pandemic state governments distributed agricultural products with an open heart yet as a matter of fact over 1500Tonnes of Food grains wasted at FCI Godowns .


Our Public Distribution  System ( PDS) and deeply – rooted bureaucratic corruption  should be condemned for millions going to sleep empty stomach  while the government already procures more than the estimated consumption. The remaining of the food grain has been stored in cold storages and godowns  which precipitates the burden of storage cost and often when they get wasted ,the government has to endure the waste management cost.

Therefore now it’s crystal clear that public money suffers double whammy of storage and waste treatment costs and on top of that moral loss due food waste in hundreds of tons is to reflect upon .


3- MAL-NUTRITION OF BOTH SOIL AND CONSUMER


Once the government pledges  the Minimum Support Price it has also incentivized food grains over other crops, inducing imbalances of water and land resources and shifting land away from crops such as pulses and oilseeds, necessitating costly inputs .


But what happens next is worrying , government godowns get stockpiled with mostly wheat and rice  because it buys only these two commodities in a sufficiently large manner. Perhaps other crops will be obscure in the time being. A growing reliance on crops such as wheat , a staple crop, is raising concern about the resilience of the food system and food security.  Lack of diversity in food crops is the direct cause behind mal- nutrition in the country. 


Following this trend agriculturalists will rely on reiterating the same crops over and over again resulting in deficiency in nutritional value of land. Crop rotation should be a sacred practice for farmers , it helps in managing soil fertility , reduces erosion , improves soil health and also increases crop productivity.  In addition to these biological advantages of crop rotations, there are positive  economic and social  aspects that result from the diverse plant combination on the farm.


On the concluding note my advice to the government is there is no point in kneeling down due to the pressure of protestors and rolling back the law would seem feeble. Beside this, it’s also high time for our economy to free from the shackles of socialism.

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