The minimum support price (MSP) of crops can guarantee stable prices but not always the best. The latter can only be ensured through fair competition in the market. This is what Niti Aayog member Prof. Ramesh Chand said while speaking on “The rationale and basis for a ‘legal MSP’ and its implications - Role of central and state governments” in the first session of the Rural Voice Agriculture Conclave organized in New Delhi on December 23.
Prof. Chand said that cultivators want MSP to get the best price for their produce and also to protect themselves from price fluctuations. However, "in my view, MSP is not the best price in all situations. It is definitely a stable price but not the best price. The best price comes from competition. If there is competition in the market, farmers can get the best price," he said.
The government fixes MSP for 22 crops. It procures wheat and paddy for supply through ration shops under various welfare schemes. Some quantities of oilseeds and pulses are also procured.
Prof. Chand, who is also a member of the government-appointed committee on MSP, cautioned that one should not become too dependent on MSP. Rather, farmers should take advantage of market opportunities.
The NITI Aayog member further said that maximum growth was being witnessed in those sectors where the government's intervention on the price front is minimum.
To press his point, he cited the rapid and sustained growth witnessed in allied sectors like dairy, fisheries and horticulture.
Therefore, Prof. Chand added, "We should not think that the MSP system could give the best price in all situations and circumstances." Observing that the MSP has its own role to play in special situations, he said it also killed the farmers' entrepreneurial skills to deal with the market movements.
Referring to the demand for making MSP a legal right, Prof. Chand said it would have several implications. He added that three prices would have to be considered — MSP, fair market price and actual market price.
In case the fair market price was more than the MSP, making the support price legal would work.
However, if the fair market price was lower than the MSP, the businessmen would withdraw from the market, creating a fiscal problem for the government.
In July this year, the government formed a committee on MSP, as it had promised while withdrawing the three contentious farm laws against which farmers had been agitating for more than a year.
The committee is looking at ways to make the MSP system more effective and transparent. It will also explore other issues, including giving more autonomy to the Commission for Agricultural Costs and Prices (CACP) that fixes the MSP of crops.