MSP For One Third of Total Production. What About the Rest?

The recent announcement of Minimum Support Prices for 14 kharif crops including paddy and many coarse grains has been met with a frenzy of self-congratulation by the Modi govt. and the BJP, egged on by an embarrassingly sycophantic mainstream media. Many have however pointed out that the declared MSP is not 50% more than the total cost of inputs, as recommended by the Swaminathan Commission, and reiterated by BJP and Modi as an election promise.

But there is more to this than just a deficient MSP. Previous years’ data shows that wheat procurement by central and state govt. agencies added up to about 28-30%, as per the reports put out by the Department of Food & Public Distribution. In 2017-18, govt. bought 30.8 million tonnes of wheat while the total production was 98.61 million tonnes. That’s 31% of the total. In a bad year, like 2016-17 when crops are affected by drought, procurement fell to just 23%.

So, what happens to the rest of wheat? Substantial portion of it is self-consumed by small and marginal farmers, and even medium farmers. This is how they are surviving. According to govt. figures, in richer states like Punjab and Haryana farmers sell more of their production (called marketable surplus) than poorer states like Bihar. Also, procurement machinery is much more extensive in these very states. So, in Punjab, out of an average 15.7 million tonnes wheat produced annually during 2014-15 to 2016-17, 14 million tonnes was sold in the markets and 10.9 million tonnes was procured by the govt. – at MSP rates. But in Bihar, out of the average 4.5 million tonnes produced annually, 3.7 million tonnes were marketed and nothing was procured by the govt. All of it was sold below the declared MSP!

This is not just a wheat problem. A similar fate awaited paddy farmers. Average procurement ranged between 30-35% of total production. The rest is either self-consumed or sold in open market at prices below the MSP. A govt. studyhas shown that in Odisha, marginal farmers are able to sell just 5% of their paddy to the govt. while large farmers sell over 36% to govt. Clearly, the advantage of MSP is cornered by bigger farmers.

In the case of coarse grains (bajra, jowar, ragi, etc.), the situation is distressingly pathetic. In 2017-18, nearly 45 million tonnes of coarse grains were produced but a mere 86,000 tonnes were procured by the govt. That’s just 0.2% of the total production. Remember – coarse grains are mainly produced by smaller farmers in rainfed areas. They need price support the most, yet they get the least.

For MSP to really benefit the whole farming community, procurement needs to be pushed up radically. But the Modi govt. has no plans to do so. Even while the new MSPs for kharif crops were being announced, it deferred the matter of procurement system claiming that this would be worked out later. 

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The intention of the govt. is clear from the storage capacity it has. If you procure food grain, you will need proper covered storage space. As per the latest Food Corporation of India (FCI) figures, there is storage capacity available for 36.2 million tonnes of food grain, of which 2.6 million tonnes is CAP (cover and plinth), that is open storage. Nearly 21 million tonnes storage capacity – about 60% of total – is hired from private parties, for which the FCI paid about Rs.834 crore rental. Even if half of the total production of foodgrain in any one season were to be sold by the farmers to the govt., warehouses would overflow, and precious grain would be left rotting. The plan of building steel silos, initiated some time ago, has resulted in addition of a mere 60,000 tonnes capacity. 

Clearly, the MSP exercise is a gimmick, announced this year with an eye to political gain in elections. The govt. knows very well that bulk of farmers are not going to be covered by procurement. Actually it is a double deception – neither is the MSP 50% more than total cost, nor is it going to cover majority of farmers. But then, that’s the way this govt. works.

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