The MSP imbroglio

The Maharashtra government’s belated denial of any proposal to penalise traders for not buying agri-commodities at the minimum support prices (MSPs) may manage to stem the mayhem in farm markets caused by rumours to this effect, but it has turned the trading community wary of the government’s intentions. Several key agricultural mandis in the state have either remained shut or transacted little business in the past few days to the detriment of the farmers. As conceded by a senior state official, providing MSPs to the farmers is the commitment of the government and not of the traders. The traders cannot be coerced to pay any price above the market-determined rates unless the government offers to recompense them for doing so. If the objective of the government in letting the buzz about sending errant traders to jail persist for a while was to show the extent to which it could go to implement the new MSPs — pitched 50 per cent above the paid-out costs — it is far from served. Most farm commodities are being traded at markedly below official rates. The farmers cannot be unaware of it.

Incidentally, making access to MSPs a legal right of the farmers has figured prominently among the demands of most farm organisations during their recent agitations in Maharashtra and other states. The Commission on Agricultural Costs and Prices (CACP), which advises the government on fixing farm prices, had also made a suggestion to this effect in its 2017-18 kharif pricing policy report. Fortunately, several non-coercive and market-friendly ways and means are available to ensure that the farmers actually realise the officially fixed prices. The final decision on the system, or a combination of systems, to implement MSPs has to be taken by the Centre as it would necessarily require its financial participation. The Maharashtra government should wait for the Centre’s decision.

The National Institution for Transforming India (NITI) Aayog, which was asked by the Centre to suggest methods of letting farmers get MSPs, has mooted three mechanisms for this purpose which merit consideration. One of these is involvement of the private sector in a big way in price-support operations, without distorting the market. For this, it suggests tax concessions, fiscal sops such as commissions, and necessary policy backing to incentivise private entrepreneurs to buy commodities at official prices and manage their stocks in a transparent manner. The other two include the ongoing market assurance scheme (where the state governments take up the procurement and distribution obligations with the Centre reimbursing part of their losses) and the price-deficiency payment scheme of the kind being tried out in Madhya Pradesh and Haryana for selected commodities. The NITI Aayog’s discussions with state governments on these schemes are said to have singled out the incentives-based private procurement system as the most promising one. It is believed to put a low burden on the exchequer; does not affect market competition; spares the government of the liability of post-procurement storage and stock management; and retains the private sector’s position as a key player in agricultural marketing. The Centre should, thus, expedite a decision on this issue to give states ample time to prepare for the approaching kharif marketing season and stave off Maharashtra-like imbroglio.