Authors: Aman Maheshwari & Soumya Tiwari
In India, agriculture continues to be one of the most pressing issues. The Indian economy has benefited greatly from it in numerous ways. However, it has also presented some difficulties. The issue of the Minimum Support Price (MSP) was identified by farmers as one of their main concerns during their protest in the year 2024(CDPP, 2024). Farmers staged protests against the three farm regulations in 2020, which resulted in their repeal in 2021. The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act is one such law, followed by the acts on Agreement on the Acts on Agreement on Price Assurance and Farm Services, Farmers (Empowerment and Protection), and Essential Commodities (Amendment) (Singh, 2021).It is imperative to understand that such ordinances by the government aimed to increase the availability of buyers for produce, by allowing them to trade and freely without any license or stock limit, primarily because of the increase in the competition among the farmers (PRS, 2020).
There have been several underlying problems with the MSP that will arise if it is legalised. It is important to understand that there has been a growing argument against legalising MSP, claiming that creating different provisions is difficult. It appears to be very unrealistic at the government front as it leads to different intricacies and complexities in the implementation. First, forcing the government to purchase all products would inevitably lead to overproduction and squandering of resources. As such, the problem of compelled procurement seems to be the largest obstacle, as its complex mechanism can create significant challenges for the government. On the other hand, forced procurement could also lead to overproduction, which can entail problems related to waste and storage. Additionally, it might cause farmers to prioritise crops with MSP over others, which would have an impact on soil diversification and biodiversity. This would skew different cropping patterns. Secondly, another This implies that it could create disparities between the farmers who grow supported crops on one hand, and who grow other crops.
Thirdly, it is important to emphasize that growing unsupported crops may put farmers in a disadvantaged position in terms of market access and government support. Thus, the ideal way to resolve this disadvantageous position would be to offer incentives to the farmers rather than just relying simply on the MSP. This would also aid in the interests of the farmers, irrespective of the fact, how the market is.
Lastly, Distortion in different cropping patterns and excessive procurement could lead to severe societal ramifications which could affect food security, environmental sustainability and the overall economic stability of the country. For instance – a huge government procurement of rice during a harvest might lead to reduction in the food prices and could lead to the reduction of food diversity.
Hence, we can say that the agriculture industry has encountered several obstacles throughout the years, necessitating a legislative assurance for MSP to mitigate this crisis. Notwithstanding the accord established with the protesting farmers, the government has not been able to implement tangible measures during the previous two years. The government ought to have swiftly responded to the demand for a legal assurance of MSP and other matters to shift the nation’s emphasis from food security to nutritional security.
Apprehension Among Farmers?
There had been apprehension among farmers related to WTO and Free trade Agreements (FTAs). They were worried that cheaper agricultural imports would become more competitive due to the WTO rules and free trade agreements, undercutting domestic pricing and hurting local farmers (Grain, 2024). Small and medium-sized farmers believe that these agreements privilege giant agro-business and multinational enterprises over them (Narayanan, 2020). In terms of imported goods, these agreements bring in a flood of subsidised agricultural items from other nations, which can drive down the price of crops grown locally by flooding the domestic market. Indian farmers may find it challenging to compete and maintain their livelihoods as a result.
Additionally, rules or regulations on agricultural techniques are imposed by international trade agreements, which Indian farmers find onerous or incompatible with their customs. This could involve regulations regarding the use of pesticides, genetically modified organisms (GMOs), or standards for the environment. Withdrawing from the WTO and suspending FTA are seen by some farmers as a means of regaining control over India’s agricultural policies and sovereignty (Ratna et al., 2021). They contend that these kinds of agreements restrict the government’s capacity to carry out measures that give small-scale farmers’ interests top priority and guarantee access to food. This has in turn created a very ambiguous situation for the Indian government as withdrawal from WTO would hamper the entire global Agribusiness and would further lead to fluctuations in the trading patterns of the countries.
For this apprehension to be addressed, Both the micro and the macro policies need to be strengthened further, with a robust mechanism as even the WTO Agreement on agriculture explicitly recognises the need for ensuring food security globally. Albeit the ongoing negotiations and discussions, WTO members must draw on equal consensus to have access to market access by signing the FTA. For instance- The most recent is the Comprehensive Economic Cooperation Agreement (CECA) being negotiated with Australia and it offers limited market access for the items where producers would not be impacted much. Concerning this, probable solutions would pave the way forward for a secured agrarian global business environment.
Key Solutions
Firstly, to guarantee fair prices for agricultural produce through programmes like MSP and direct income assistance schemes, the government must devise a proper transition to agricultural pricing policy. Under the Price Deficiency Payment (PDP), farmers receive the difference between the market price and MSP, if the former is lower, rather than the government physically buying or stockpiling any crop. These buffer stocks are a crucial component for the emergency preparedness and uncertainties. Further, the amount of harvest they sell to the private market will determine how much they are paid. This also provides farmers a safety net for the farmers, ensuring they don’t lose money if their market prices drop below the declared MSP.
Second, the list of crops eligible for MSP support might be gradually expanded by the government to promote crop diversity and lessen the dominance of rice and wheat. It may be interesting to note that the Commission for Agricultural Costs and Prices (CACP), had recommended 22 mandated crops for the MSPs and fair and remunerative price for sugarcane. Further, the mandated crops include 14 crops of the Kharif season, 6 rabi crops and 2 other commercial crops. This provide farmers with additional options and encourage the production of crops that meet consumer demand. Thus, a balanced strategy that takes into account both the concerns of farmers and the larger economic ramifications is needed to address the MSP issue. A fair and transparent process for deciding MSP, along with a review of the MSP calculation technique, could help allay some of the worries expressed by the farmers.
Thirdly, an efficient method is required to underscore the idea that the government ought to encourage daily wages in addition to incorporating agricultural operations under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). To improve their chances of making more money, farmers should choose high-value, climate-resilient crops and Diversification. This can entail different mechanisms such as focus on financial security; emphasizing local benefits; creating community forums; interaction with the stakeholders, and creating interactive and iterative maps to provide avenues to the farmers.
Thus, to minimise post-harvest losses and enhance price realisation for farmers, agricultural marketing infrastructure, such as farm-to-market connections, storage facilities, and market information systems must be strengthened, and promoted at both the micro and the macro level. Thus, we are yet to witness a future course of action on the agricultural sector as a lot depends on the round of negotiations among different countries. The consensus on the issue would not only determine the position of India but also the roadmap to different multilateral trading agreements.
Authors
Aman Maheshwari is a doctoral fellow in OB & HR domain at FORE School of Management, New Delhi. He has completed his masters in the domain of HR from SOIL Institute of Management. His research areas include: – Green HRM, Employee Green Behaviour, Sustainable HRM, Green Organizational culture.
Soumya Tiwari is a doctoral researcher in international business at FORE School of Management, New Delhi. She has completed her Bachelor’s degree in Political Science from Maitreyi College, University of Delhi, and Master’s Degree in Political Science with specialization in International Relations from University of Delhi. She also serves as the Chair of Asia and Oceania SRC. Her interest areas include emerging markets, geopolitics, trade, and multilateralism.
References
GRAIN. (2024). Farmers’ protest: Why are farmers demanding India’s withdrawal from WTO? Bilaterals.org. https://www.bilaterals.org/?farmers-started-protesting-with-a
Centre for Development Policy and Practice. (2024). MSP as a legal right: Benefits and challenges. https://www.cdpp.co.in/articles/msp-as-a-legal-right-benefits-and-challenges
Narayanan, S. (2020, September 28). The three farm bills. The India Forum. https://www.theindiaforum.in/article/three-farm-bills
Ratna, R. S., Sharma, S. K., Kumar, R., & Dobhal, A. (2021). Indian agriculture under the shadows of WTO and FTAs: Issues and concerns. Springer. https://doi.org/10.1007/978-981-16-4795-0
Singh, S. (2021, March 15). Food security and markets: Understanding the protests over India’s changing social contract with farmers. The Hindu Centre. https://www.thehinducentre.com/the-arena/current-issues/article34060554.ece
PRS Legislative Research. (n.d.). The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020. https://prsindia.org/billtrack/the-farmers-empowerment-and-protection-agreement-on-price-assurance-and-farm-services-bill-2020
