Benefits of Minimum Support Price
- Income Security: MSP guarantees farmers a minimum price for their crops, ensuring a stable income and protecting them from market price fluctuations.
- Price Stability: MSP helps stabilise the prices of agricultural products, preventing extreme fluctuations and ensuring affordable prices for consumers.
- Encourages Production: Minimum Support Price motivates farmers to increase their agricultural production by providing them with a fair price for their produce.
- Food Security: MSP promotes a steady food supply by encouraging farmers to produce staple crops, reducing dependence on imports, and enhancing domestic food security.
Issues with India’s Minimum Support Price (MSP) Regime
- Non-proportional increase: The support prices that are being provided do not increase at par with increase in cost of production. A rating agency, CRISIL pointed out that the increase in MSP has indeed fallen during 2014-17.
- Reach: The benefits of this scheme do not reach all farmers and for all crops. Not all farmers have been able to get the benefits of MSP because of lack of awareness. There are many regions of the country like the north-eastern region where the implementation is too weak.
- Excess storage: MSP without sufficient storage has resulted in huge piling of stocks in the warehouses. The stock has now become double the requirements under the schemes of PDS, Buffer stock etc.
- Market distortion: It distorts the free market by favouring some particular crops over other crops.
- Fiscal burden: Open-ended procurement of paddy and wheat at MSPs is completely out of sync with market prices and leads to fiscal burden.
- Impact agricultural exports: Hikes in MSP also adversely affect the exports by making Indian farm goods un-competitive especially when international market prices are lower.
- Ecological problem: MSP leads to non-scientific agricultural practices whereby the soil, water are stressed to an extent of degrading ground water table and salinization of soil.
- Crop diversity: MSP affects the crop diversity of India. With MSP cropping patterns get affected as it leads to skewed production of MSP supported crops like rice and wheat.