Why Farmers Should Trust The Modi Government's Assurance That MSP, Central Procurement Will Continue

Two major issues raised against one of India’s most forward-looking agricultural reforms are that it could result in the schemes of Minimum Support Price (MSP) and the Central procurement scheme to build buffer foodgrain stocks ending, albeit by the Centre.

While some farmers have been made to believe the campaign against these reforms, which incidentally, the Congress had promised in its 2019 Lok Sabha manifesto, many have tended to overlook some saner voices from the government.

Led by Prime Minister Narendra Modi, the farmers have been time and again assured that no such thing, as they fear, will happen.

During the weekend, Modi said that MSP and Central procurement were key to food security in the country and they will continue.

Before we look into this, it is important to look back at what happened.

'Agri reforms are like 1991 economic reforms'

Opposition parties, led by the Congress, have been whipping up fears over these two issues to provoke farmers into agitations in some parts of the country.

This is particularly true with Punjab, where growers, especially those cultivating paddy and wheat, are heavily dependent upon MSP and Central procurement.

The State accounts for nearly a third of the foodgrains procured by the Centre.

In June this year, the Centre came up with three major agricultural reforms through three ordinances.

These ordinances gave farmers the freedom to sell their produce to whomever they want and in any part of the country, and also to enter into contract farming in a language they know and understand.

The third one removed the cap on essential commodities stocks so that wholesalers and industrial users can continue buying agricultural produce during peak arrival season without worrying about attracting the provisions of the Essential Commodities Act.

The ordinances were passed as part of the Rs 20 lakh crore Atmanirbar Bharat Abhiyan to help the economy recover from the effects of the coronavirus pandemic.

Agricultural economists such as Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices, have hailed the reforms as equivalent to the 1991 economic reforms of the P V Narasimha Rao government.

The ordinances have been passed into laws, with Parliament approving the Bills in this regard.

One of the fallouts of these reforms is that they will also end the advantage that some political parties such as the Congress have been enjoying in the rural areas, particularly in the States of Punjab, Maharashtra, Haryana, and Madhya Pradesh.

Why farmers shouldn’t fear that MSP, Central Procurement will end

A simple look at the data with regard to Central procurement and MSP should allay the fears of farmers that both these schemes will end.

According to the 2015 High-Level Committee Report on Reorientation and Restructuring of Food Corporation India, submitted a group chaired by former union minister Shanta Kumar, at least 67 per cent of the people in the country are covered by the National Food Security Act (NFSA).

This means that each person in a beneficiary household is entitled to 5 kg of foodgrain (rice or wheat) every month.

The foodgrains are distributed through ration shops.

Even if the Centre goes by the Shanta Kumar report and prunes the beneficiaries to 40 per cent of the population, a significant portion of the people will be entitled to these foodgrains distributed at between Rs 1 and Rs 3 a kg.

If India’s population is assumed to be over 135 crore, at least 33.8 crore will benefit from grains distributed through the NFSA scheme.

A simple calculation puts the amount of foodgrain distributed under NFSA scheme at nearly 16 million tonnes (mt).

Besides, the Centre also provides foodgrains through ration shops under the Antodaya Anna Yojana, providing an entitlement of 35 kg per month, to the poorest of poor.

According to the Shanta Kumar committee, the total requirement of foodgrains for distribution through rations shops and in other schemes was 61.2 mt a year in 2015.

According to the Food Corporation of India, the lifting of rice and wheat under NFSA scheme till September this fiscal was 24.67 mt or 45 per cent of the 55 mt allotment made by the Centre.

The monthly offtake of rice and wheat by the States from FCI is 4.6 mt and 2.1 mt respectively (for June this year).

This means that rice and wheat offtake this fiscal could be at least 72 mt a year.

This is out of the projected production of 225 mt of wheat and rice put together. This means 32 per cent of the total production is procured by the Centre for distribution through ration shops.

The Centre will have to rely on procurement, as farmers retain 30-32 per cent of their produce for their own consumption and seeds.

Even pulses and coarse cereals are being distributed through ration shops, though volume-wise they are meagre.

What the Prime Minister and officials say is that the country will need at least 30 per cent of rice and wheat produced for distribution through ration shops.

Given the above data, whichever government is in power, it will have to fully rely on procurement to meet the growing needs — it has gone up by at least 10 mt in the last five years.

Another issue is that now, there are demands from all States to be covered under procurement equally, than for procurement be confined to a few.

These are pointers that Central procurement will continue as long as the public distribution system continues in the country. And any government in power will point to food security to continue the PDS.

It is for supply to the PDS or rations shops that the government maintains buffer stocks. Thus, there should be no fears over the system continuing in the near future.

Some of those indulging in a campaign against the reforms point to compulsions of India being a World Trade Organisation (WTO) member and some member-nations going to the dispute settlement panel against MSP for foodgrains.

These countries argue that India is distorting the global market with the MSP. But that should not worry farmers since no government can afford to compromise on farmers’ welfare.

If the WTO finds problems with the MSP and Central procurement practices, the government can always opt for a scheme where it can fix a minimum price norm for a commodity.

In case farmers get lower than such a fixed price, the government can reimburse the shortfall — something like what the Madhya Pradesh government did a couple of years ago to ensure MSP for its farmers.

There is an argument that procurement currently covers hardly 10 per cent of the total farmers in the country. That way, too, there is no cause for worry.