SC-appointed Panel Wants MSP Purchases Capped, Limited to Wheat & Rice

The Supreme Court-appointed committee which reviewed the now-repealed three controversial farm laws has recommended that open-ended procurement of agricultural crops be ended by capping rice and wheat purchases at the minimum support price (MSP) and creating a price stabilization fund for other key crops in place of MSP support.

The three-member committee also suggested that mandi fees charged by Agricultural Produce Marketing Committees (APMCs) be eliminated in order to lower the cost of purchases by traders and allow farmers to obtain higher returns.

Procurement of crops at declared MSP can be the prerogative of the states, the committee said.

Farmers who had been protesting against farm laws on the Delhi boundaries for over a year had demanded that the MSP system be strengthened with statutory backing. The Narendra Modi government, which repealed the laws in the midst of the agitation, has said clearly that the MSP system will stay in force.

The panel has also encouraged the government to either repeal or significantly weaken the Essential Commodities Act in order to facilitate a free market and prevent strict stock holding limitations.

Anil Ghanwat, president of the Maharashtra-based Shetkari Sanghatana and a member of the panel, said in a report released on Monday that the committee discovered that more than 86 percent of 73 farmers' organizations representing around 3.8 crore farmers supported the farm laws, which had sought to redefine the rules for the marketing of agricultural produce to improve farmers’ access to markets.

A year ago, the panel submitted its report to the Supreme Court. The research emphasized the opinion shared by many leading agricultural economists that the laws were designed to foster private investment in well-oiled supply chains in order to minimize logistical costs, boost value addition, and reduce food losses.

According to the panel, the price triggers for imposing stock holding limits on perishables and non-perishables should be 200 percent and 75 percent, respectively, to ensure that markets are not disrupted without a valid reason. The repealed law that tried to amend the EC Act proposed limits of 100 percent and 50 percent for perishables and non-perishables, respectively. Currently, these constraints are imposed as an ad hoc policy response to market conditions.

The panel said a price stabilization fund would address extreme price fluctuations if any in commodities such as Nutri-cereals, pulses, oilseeds, and even onion and potatoes.

"The terms of reference for CACP can be expanded to collate, analyze, and disseminate price information — both domestic and international, with a view to facilitating efficient price discovery — both spot and futures," said the panel, which also included Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices (CACP), and Pramod Kumar Joshi, former director-South Asia, International Food Policy Research Institute.

CACP now recommends MSPs to the government for 23 agricultural commodities, including cereals, pulses, oilseeds, and cotton.

It suggested a compensation fund for the next three to five years in the case of revenue loss owing to the abolition of APMC taxes for states.

Punjab and Haryana impose sundry levies such as mandi tax, rural development cess, and arthia commission at 8.5% and 6.5% on cereals purchased in the APMC mandis, while other states such as Madhya Pradesh and Rajasthan have a levy structure in a range of 3-5%.

Currently, the FCI buys around 35% of total rice and wheat production at MSP rates.

Parliament enacted three farm laws in September 2020: the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; and the Essential Commodities (Amendment) Act, 2020. Following prolonged protests by a section of the farmers’ community, the Parliament passed the Farm Laws Repeal Bill on November 30, 2021, to annul them.