MUMBAI: At a time when the government is moving towards the idea of regular increase in the minimum support price (MSP) amidst farmers’ clamour to provide legal backing for the pricing mechanism, the SBI research team has said this is more of a political obsession, stifling the shift to smart agriculture practices. It holds back the redressal of pressing issues in agri value chain financing and livelihood support, because the MSP regime covers just about 6 percent of the farm universe, says the SBI report.
If the government procures all the MSP crops, the fiscal burden will be a whopping Rs 13.5 trillion of FY24 GDP, argues Soumyakanti Ghosh, the chief economic advisor at SBI in the pre-budget report. He has instead called for crop diversification and better farming practices along with better farm value chain financing.
Food grain output (a key MSP item) is only 17 percent of overall output of the agri sector, while as much as 71 percent of agriculture output is generated through vegetables, fruits, fisheries, forestry and livestock. But the politics of MSP fails to address the concerns of the rest of the sector in a more holistic manner, says the report.
Agriculture and allied sectors were estimated at Rs 56.19 trillion in FY23. But the share of food grain in the agri & allied output is only 17 percent, while livestock is 30.7 percent and vegetables & fruits are 11.4 percent. But food grain output of Rs 3.4 trillion, which the government procures under MSP, is at 6 percent of the total agri & allied output in FY23.
Stated differently, since the MSP addresses only 17 percent of the agriculture output, the remaining 83 percent needs to be supported through continued agricultural sector reforms but MSP as a political weapon obfuscates the issues facing the agri sector, says the report.
During the past 10 years, MSP of all the 22 crops has been increased on an average more than 100 percent but the government procures mostly wheat and paddy through FCI and state agencies. Additionally, oilseeds, pulses and copra are procured from registered farmers under price support scheme under umbrella scheme, as per its guidelines at MSP in consultation with the respective states, when market price of these produce falls below the MSP. Cotton and jute are also procured by the government at MSP through the Cotton Corporation and Jute Corporation, respectively.
Currently market prices are higher than MSP when it comes to maize, arhar, urad, paddy, sesamum, wheat, gram, masur etc, while for crops like jowar, bajra, ragi, moong, soyabean and cotton, they are lower than MSP.
