The resurgence of protests by the kisans has focused public attention on their longstanding demand for guaranteed minimum support prices (MSP) for all agricultural products. When kisan unions suspended their year-long agitation at the Delhi borders in January 2022, the Central Government had assured them that it would fulfill this demand. However, the Central Government has not taken any step towards fulfilling this demand during the past two years. Now all kinds of deceptive propaganda is being carried out by government spokesmen and various bourgeois economists, to discredit the struggle of the kisans and justify the government’s refusal to fulfill their demands.
Minimum Support Prices
The Central Government announces a Minimum Support Price every year for 23 agricultural products, consisting of seven cereals (wheat, paddy, maize, barley, jowar, bajra and ragi), seven oilseeds (mustard, groundnut, rapeseed, soybean, sunflower, sesame, and niger seed), five pulses (moong, arhar, urad, chana and masoor) and four commercial crops (cotton, sugarcane, raw jute and copra). However, the government does not organise procurement of all these products at the MSP. Kisans are assured of being paid the MSP only in the case of wheat and paddy, and even that only in some regions of the country.
According to data presented by the Ministry of Agriculture in Parliament, less than 15 percent of kisans benefit from the MSP. More than 85 percent sell their produce at prices which are often less than MSP. In many cases, the price they receive is not even enough to cover the costs they have incurred in production.
Guaranteeing MSP for all agricultural products will not only contribute to security of livelihood for kisans but also serve to improve the cropping pattern. It is an indisputable fact that too much of cultivable land is at present being used for planting wheat and paddy. Pulses and oilseeds are not being produced in adequate quantities, resulting in the need to import them. Guaranteeing MSP for pulses and oilseeds will induce farmers to produce more of such crops and less of wheat and paddy.
Actions Needed to Guarantee MSP
Guaranteeing MSP is generally understood to mean the enactment of a law that declares it to be illegal for anyone to purchase any agricultural product at a price less than the MSP announced by the government. The enactment of such a law would make it difficult for any future government to reverse the policy of guaranteeing MSP. This is the reason why kisan unions are demanding such a law.
While enacting a law is necessary, experience suggests that it may not be sufficient. For instance, there is already a law which requires privately owned sugar mills to pay sugarcane growers the “fair and remunerative price” set by the Central Government within 14 days of supply. However, the capitalists who own sugar mills frequently delay paying the kisans. They violate the law with impunity, knowing that the existing state machinery will not punish them. For a legal guarantee to be effective, it would need to be accompanied by public procurement.
One of the ideas being promoted these days is that instead of organising public procurement, the government can leave procurement to private traders but pay the difference to the kisans whenever they sell below the MSP. A major problem with this approach is that it will create possibilities for private traders to drive down the market price and profit at the expense of the government budget. An additional problem is that the government lacks reliable information about the price and quantity of every product sold by every kisan. If it relies on information collected at its regulated mandis, many poor peasants who do not reach those mandis but sell to some middleman in their villages will not be adequately compensated. They will continue to receive less than MSP.
Public procurement is the only way to effectively guarantee that all kisans receive at least the MSP for their produce. Central or state government agencies must purchase a major part of the agricultural products for which MSP are announced. Life experience shows that even if 30 percent of a crop is purchased by public agencies at the MSP, then all private traders are also compelled to pay that price.
Arguments against Guaranteeing MSP
Various arguments are being advanced by government officials and so-called economic experts to convince people that the demand of the kisans is unreasonable.
One of the arguments is that guaranteeing MSP would lead to higher retail prices and hence to higher cost of living for the working class. A second argument is that organising public procurement of all the 23 crops for which MSP are announced would allegedly cost so much that the government would have too little money left to spend on other important purposes. A third argument is that if nobody is allowed to buy agricultural products at less than MSP, it will end up hurting the interests of kisans because they will not be able to sell their produce when there is a bumper crop, that is, when production is far higher than the quantity annually consumed by the people.
Let us examine these arguments, one by one.
Impact on Retail Prices
In order to assess the impact on retail prices, an important fact to note is the huge difference that exists between the price which is paid to kisans and the retail price, that is, the price which a worker pays to buy dal, oilseeds and other agricultural products in a grocery store. For example, the MSP for arhar dal in 2023-24 is Rs. 7000 per quintal (Rs. 70 per kilo), while the retail price in grocery stores is around Rs. 200 per kilo.
Why is the retail price of a commodity like arhar dal more than double the MSP? The reason lies in the huge profits being pocketed by the private merchants and capitalist companies engaged in wholesale and retail trade.
Suppose a public agency like the Food Corporation of India had procured arhar dal from the kisans at the MSP of Rs. 70 per kg. Adding the average cost of transport and storage, the same agency could have sold arhar dal to retail shops at around Rs. 75 per kg. A worker could have bought it in the grocery store at much less than the Rs. 200 per kg which is the prevailing retail price. If arhar dal is distributed through the ration shops, then it could be made available at less than Rs. 100 per kg, that is, at less than half the current retail price.
If the procurement and distribution of agricultural products are carried out by public agencies instead of private entities, the retail price can be brought down. The gap between the price which kisans receive and the price a worker pays can be narrowed. In other words, those who say guaranteeing MSP will lead to higher retail prices are turning truth on its head.
Cost of Public Procurement
What would be the cost of organising public procurement of all the 23 agricultural products for which MSP are being announced? The total value of these products in 2019-20 was about Rs. 10 lakh crores. Various government officials are reported to have stated that if Rs. 10 lakh crores are spent to procure agricultural products, there would be too little money left with the government for other important purposes.
This argument is seriously flawed for two reasons. Firstly, the government need not purchase the entire quantity produced; public procurement of a major share is enough to stabilize the market price at the MSP. Secondly, this argument does not take into account the money which the government agencies will get back when they sell what they have bought.
As has been noted above, if a government agency procures arhar dal at the MSP and sells it at a price that equals the MSP plus the average cost of transport and storage, the retail price can be cut by half, without any recurring expenditure from the budget. Whatever is spent on procuring, storing and distributing this commodity can be fully recovered.
The additional cost involved is only for the investment required in enhancing public storage capacity. At present, the FCI and other public agencies have warehouses to store mainly wheat and paddy. If they start procuring large quantities of other crops, they would need to expand their storage capacity. If public procurement is linked to public distribution, there would also be need to open more fair price shops. Such expenditure would be worthwhile investment, which serves not only to ensure remunerative prices for the kisans but also to ensure the availability of food items at affordable prices to the working people.
Impact of a Bumper Crop
Last but not the least, let us consider the argument of some economists, that if MSP are guaranteed, then kisans will be unable to sell their produce when there is a bumper crop in some year.
Those who make this argument are having private traders in mind. It is only a trader who is out to maximise his private profit who will insist on a lower price whenever some commodity is available in excess of its immediate demand. A public agency can purchase at the MSP and store the commodity, for future use. All the 23 products for which MSP is being announced every year are durable commodities. It is therefore quite possible to store them for future consumption. Investment in cold storage facilities would be required when MSP guarantee is extended to perishable goods, like fruits and vegetables.
Public procurement of all agricultural produce will make it possible to influence the cropping pattern each year, in line with the available stocks and predicted demand. If there is a shortage of a particular crop in one year, leading to depletion of stocks, a higher MSP could be announced for the following year, to encourage kisans to grow more of that particular crop. For those products which are in excess supply, MSP could be kept at its minimum level in the following year. The procurement prices could thus be used to encourage crop diversification, aligned to the pattern of consumption demand and to the natural conditions specific to each region.
Conclusion
The real reason why the Central Government is not keen to guarantee procurement of all agricultural products at MSP is not because it will lead to higher retail prices. It is not because it costs too much money, or because it will hurt the interests of farmers when there is a bumper crop. The real reason is because public procurement at MSP is not in the interests of monopoly capitalists who want to reap maximum profits from agricultural trade.
The past 10 to 20 years have witnessed the rapid growth of private monopoly companies in the sphere of agricultural trade. Indian and international companies which have been purchasing more and more agricultural products include Walmart, Amazon and companies owned by the Tatas, Mukesh Ambani group, Aditya Birla and Adani groups.
The demand of kisans for guaranteed procurement at MSPs is part of the struggle against orienting agriculture towards fulfilling capitalist greed. It is in the service of ensuring secure livelihood for those who produce food and e
nsuring adequate availability of food at affordable prices for all. It deserves unconditional support from the working class and people.