What government promise of MSPs to farmers actually entails

The Centre on Thursday sent an official letter to the Samyukt Kisan Morcha promising to form a committee to take a call on minimum support prices (MSPs) immediately.

The letter agreed to the demand for a panel on MSPs on which farmers’ representatives would be present.

The farmers have said that they will end their protest on December 11, 2021, on the borders of Delhi and return home. Farmer leader Balbir Singh Rajewal said that his compatriots will take out victory marches on Saturday to their homes. He added that the SKM, an aegis of farmer unions, will hold another meeting on January 15 in the national capital.

Prime Minister Narendra Modi said on November 19 that the government’s three controversial farm laws will be withdrawn. The announcement and the subsequent parliamentary action repealing the laws have brought to an end the intense year-long protests against the laws. 

But the protesting farmers, after initial show of triumph, are wary of the government’s promises – they are still holding out for MSPs for their produce.

Also read: Explained: Understanding the new farm laws and farmer protests in India

The government sets MSPs on 23 crops — it is the recommended price at which select cereals, pulses, oilseeds and commercial crops can be procured from farmers. The purpose of an MSP is to make sure farmers do not face huge losses because of the crops, that they recover at least 50 per cent of what they invested in cultivating them.

Currently the government offers no legal guarantee that it will buy produce at a minimum price. While roughly one-third of the rice and wheat produced is bought by government agencies at MSP, mostly in the northern states, the balance is procured by other buyers.

Often farmers are pushed to sell below the MSPs. The minimum rate cannot be forced on the buyer since it is just an indicative/desired price and not a mandatory one. The farmer unions are seeking a law that would make MSP mandatory, so that the buyer cannot evade it.

If MSP is legalised through an Act of Parliament, the government would have to make sure each of the 23 crops is purchased fully at the prescribed rate. Apart from the practical complexity of such a framework, the proposed move would likely cost the exchequer ₹17 lakh crore, though there are arguments over that figure. There is also the cost of developing new facilities that would be needed to store and transport the food-grains thus procured.

The move would open a Pandora’s Box, say critics of MSP. “All the revenue will be diverted toward this and there will be no money left with the government to develop and maintain essential things like roads, bridges and so on,” says Anil Ghanwat, a member of a Supreme Court committee formed to examine the farm laws. “If MSP is made legal for the 23 crops, soon, other farmers will also come up with the demand for their crops such as fruit and vegetables.”