In a hard-hitting interview where he frequently counters and rebuts many of the points made earlier by the agriculture economist Ashok Gulati, professor of Economics at Jawaharlal Nehru University, Himanshu, has emphatically said that the minimum support price is “a subsidy to consumers and not to farmers”.
Professor Himanshu has also argued that when farmers ask for MSP to be made legally binding what they are, in fact, saying is that the government must fulfil its five-decade commitment to properly implement and enforce the MSP regime it has claimed to be committed to. In fact, he says, MSP has applied to wheat and rice but rarely, infrequently and usually not properly to all the remaining 21 crops to which it’s supposed to apply. Legal-binding will ensure it does.
Himanshu said that if MSP is properly applied to the 21 crops, other than wheat and rice, it will provide an incentive for farmers to diversify. As he said, treat farmers like businessmen. They will respond in their own interest to the incentives offered to them if, repeat if, the MSP regime is applied to all the other crops to which its meant to. Taking the example of edible oil which, at present, is imported at great expense, if MSP is applied properly to oil seeds (or pulses) the need for import will immediately diminish if not disappear.
One other important point discussed with Himanshu are newspaper reports that the government is considering giving a five-year MSP commitment for pulses, maize and cotton. Himanshu says he cannot understand why it’s limited to five years and questions whether its legally binding or will be like the present MSP. He also asks why it is not extended to all the other 23 crops to which MSP is supposed to apply.
Here are the questions he was asked.
1) Why do you believe making the minimum support price for 23 crops legally binding is the right way of helping farmers?
2) How do you respond to Ashok Gulati, who has told me that making MSP legally binding would be anti-farmer? He says when the MSP is higher than the market price, private traders will refuse to buy thus either leaving farmers with unsold surplus or forcing the government to step-in and buy everything. The first would be a disaster for farmers. The second would have very adverse budgetary and fiscal implications for the government.
3) According to a study done in 2018-19 by Ashok Gulati and quoted by the Business Standard only 8.8% of agricultural households sell any crop under MSP. Gulati says that figure is perhaps 10% today. So clearly MSP is not a concern for 90% of agricultural households. Why then should it be made legally binding?
4) Let me raise a second issue. Gulati says high-flying sectors of Indian agriculture like poultry, growing at 8-9%, fisheries, growing at 7-8%, and milk, growing at 5-6%, do not have access to any MSP regime and yet are flourishing. Doesn’t this mean that a legally binding MSP is not necessary for agricultural growth?
5) Do you have an estimate for what a legally binding MSP for 23 crops would cost? The Times of India puts it at 10 lakh crore. But won’t it vary crop by crop and region by region and depend on what the market price is and how much the government has to make-up?
6) The second connected question is how should MSP be calculated. Farmers are insisting that it should be on the basis of C2 + 50%. On this specific issue, what’s your position?
7) Ashok Gulati says that if MSP is calculated on the basis of C2 + 50% food prices would increase by 25-30% which will have a huge impact on inflation right across the economy. How do you respond to that?
8) At the moment and for the next five years the government is committed to giving free wheat and rice to over 800 million people. If MSP is fixed at C2 + 50% this would hugely increase the cost for government which would either kick-up the fiscal deficit or substantially reduce resources for other essential expenditure such as health, education and even agricultural development itself.
9) Let me put a wider thought to you. Rather than help farmers through a legally binding MSP there’s a view they should be given income support, which I believe is the practice in China, another country where agriculture happens mainly on small holdings. This would leave farmers free to decide whether they want seed, power, fertilisers and use the income support as they want.
10) Let me put a second thought to you. The real concern is to find effective ways of increasing real incomes for farmers. How do you respond to the view that rather than grow rice in Punjab, which is an environmentally unwise choice, we need to incentivize them to move to high-value agriculture such as fruit, vegetables, livestock and fisheries?
11) It’s often said the core problem is that governments in India have a pro-consumer bias. They care more about controlling inflation for urban populations than helping farmers increase their income. Do you agree that lies at the bottom of the problem farmers face?
12) In a piece you wrote for the Indian Express on February 17 you said: “It is unfair to treat the cost of procuring rice and wheat as the cost of the MSP programme for rice and wheat. In fact, almost all of it is a subsidy to consumers and not to farmers.” Can you explain how MSP for rice and wheat is a subsidy for consumers?
