Crops Selling Below MSP Even After a Global Price Hike

According to the Government data for the month of October, despite the intense spike in prices recently, freshly harvested crops in India are now being sold at prices below the minimum support price set by the government for the commodities. 

This has surely increased the apprehension that the farmers feel towards the government and might play a pivotal role in the farmer’s protest, as one of the things that are being constantly demanded by the farmers is MSP for all crops and to make MSP a law. 

However, this is not something new as we have seen this very incident repeating itself multiple times over the years it was there in 2018 was there in 2020 and is now here in 2021. 

According to data from the official Agmarknet portal for 14 agricultural markets, average prices of summer-sown season products were up to a third (33%) lower than MSPs in October for crops such as paddy, coarse cereals, pulses, and other crops that give edible oil, such as groundnut and the prices for bajra or pearl millet were one-third lower than the benchmark MSP last month, while maize prices fell by 12%. 

This is The MSP is not functioning as it should. The Minimum Support Price (MSP) is a type of market intervention used by the Government of India to protect agricultural producers against a sudden drop in farm prices. The Government of India announces minimum support prices for specific crops at the start of the growing season based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). MSP is a price set by the Government of India to safeguard producers - farmers - from severe price drops during bumper output years. The minimum support prices are a guaranteed price from the government for their produce.  

It is also supposed to be an assurance given by the Govt to the farmers for a minimum of 50% profits over a narrower measure of the cost of cultivation and for farmers selling at any price below MSP means selling at a loss.   

However, this very purpose is being defeated due to the sale of various commodities falling below the MSP levels recently. According to R Mani, a former economist with the Tamil Nadu Agricultural University, “Many reasons can make MSPs ineffective. Low demand or policies that discourage exports, especially at a time when international prices are high are examples,”  

Minimum Support Price can also not be made into a legal right as the farmers want as private traders will completely end up leaving the market if the Msps are not profitable for them thereby forcing the Govt to buy the crops themselves (basically make the govt scramble for money to buy the crops) and hence making it more difficult to build a more dependable platform for the farmers. Minimum support price hence can be called as more of a benchmark and definitely cannot be called as a solution to the problem.