Answer Writing Practice for UPSC IAS Mains Exam: Paper - IV (General Studies – III) - 05 October 2018


Answer Writing Practice for UPSC IAS Mains Exam


UPSC Syllabus:

  • Paper-IV: General Studies -III (Technology, Economic Development, Bio-diversity, Environment, Security and Disaster Management)

Q. Is the minimum support price (MSP) an effective solution to the problems of farmers in India? Critically examine (250 words)

Model Answer:

Approach:

  • Why in news?
  • Introduction
  • Arguments in favour
  • Arguments in against
  • Alternative solutions
  • Conclusion

Why in news?

The government on October 3rd approved an increase in the MSP offered for rabi crops.

Introduction

  • A part of India’s Agriculture Price Policy, MSP is the guaranteed ‘minimum floor price’ that farmer must get from the government in case the market price of the crops falls below the MSP in the event of glut and bumper harvest. The Rationale behind MSP is to support the farmer from excess fall in the crop prices.
  • The MSP for various crops is announced by the central government at the beginning of every crop seasons on the recommendation of CACP.
  • MSP is currently announced for 25 commodities.
  • Most of the farmers’ problems are ultimately convertible to income.

Arguments in favour

  • MSP is an assured payment system that confirms to government’s one price policy. It directly influences farmer’s pocket.
  • Considers various factors when fixing the price, does not leave the farmer at the mercy of the market.
  • Procurement for PDS and Buffer stock for food security come from this planning.
  • Has a heavy influence on market prices. Also helps the farmer grow and match up with the other sectors in terms of income.

Arguments in against

  • Hiking MSP without investing in infrastructure is just a short-term play. While it does deliver immediate results, long-term developments to back-it up are also important.
  • MSP covers numerous costs. Like cost of sowing (A2), labour (FL), etc. These considerations are controversial with suggestions that it should be based on comprehensive costs (C2), which includes the land rent costs.
  • Too much of an hike on MSP, either paves way for inflationary effects on the economy, with rise in prices of  foodgrains and vegetables, or loss to government treasury if it decides to sell at lower price as compared to the higher MSP it bought at.
  • MSP is a nationwide single price policy. But the actual costing for production varies from place to place, more severely so in areas with lack of irrigation facilities and infrastructure. Thus, not all farmers have equal benefits.
  • Market prices should ideally never be below MSP.  If they fall below, in concept the farmer can always sell it to the government, which will then resell it or store as buffer. But practically this does not always happen. Market value in many cases does fall below MSP due to lack of infrastructure and procurement apparatus on government’s behalf.
  • MSP is notified for 25 crops but effectively ensured only for two-three crops.

Alternative solutions

Farmer interest is better served by –

  • Removing all restrictions on marketing, storage and movement (including export) of produce
  • Making fixed per-acre payments irrespective of the crop that is grown
  • Providing institutional credit
  • Proper land reforms
  • Access to irrigation facilities
  • Increasing productivity of farms
  • Insurance coverage (PMFBY is a good initiative)
  • Public investment in agricultural infrastructure
  • Providing education and developing skills of farmers (Kisan Channel is a welcome step)
  • Promotion of rural non-farm sector
  • Setting up of village level labor-intensive industries

Conclusion

A robust mechanism that actually helps farmers get the declared MSP for a crop is being pursued through a price deficiency payment scheme and a private procurement plan. But this is still in a nascent stage and is not adequate. There needs to be a holistic reboot of the agriculture sector, particularly to address the restrictive trading policies and excessive government interventions that deter productivity enhancements.

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