As the renewed agitation of farmers in the heartland of the Green Revolution marks its anniversary, with leader Jagjit Singh Dallewal intensifying his fast-unto-death at the Khanauri border between Punjab and Haryana, the central government has invited the protesting farmers for a second round of talks in Chandigarh today. While the first round on February 14 was described as ‘cordial’, the crucial issue of a legal guarantee for minimum support prices (MSP) was sidestepped—something farmers insist must be on the agenda this time.
Support for MSP guarantee is growing, with political parties and the parliamentary standing committee on agriculture backing it. Under increasing pressure, the government seemingly has little choice but to prioritise farmers’ welfare and national food security.
This would require a firm stance against intermediaries—traders, middlemen and some agribusiness firms—posing a significant challenge for the government and compelling a shift in agrarian policies. A conciliatory approach from the Centre would be essential, especially as it advances the National Policy Framework on Agricultural Marketing, which peasant groups view as an attempt to corporatise agriculture.
Each state’s Agricultural Produce Market Committee Act must be amended to ensure farmers’ produce is never purchased below the MSP, with penalties for violations. The government must also be prepared to procure up to 25 percent of total production as permitted under the price support scheme (PSS) if private traders fail to procure at the MSP—especially during post-harvest periods when temporary supply-demand mismatches occur. A national policy framework reflecting such strong government ‘intervention’ would stabilise prices above the MSP without overburdening the exchequer.
Several initiatives have already been tried to operationalise a legal MSP. The Maharashtra government and the Karnataka Agricultural Prices Commission have taken steps in this direction. In 2018, a private member’s bill was introduced in parliament, too. A noteworthy model is the draft Andhra Pradesh Farmers’ Produce Support Price Act, 2023, which allows barrier-free transactions by the private and cooperative sectors while ensuring that no transaction occurs below the MSP.
Timely intervention is crucial in agriculture, as delays in procurement can significantly impact farmers’ price realisation. Market trends across states show crop prices fall below the MSP for about three months post harvest—and only in three out of five years for crops with an established MSP. Data also shows that no more than 25 percent of a crop’s total production enters the market immediately after harvest, necessitating targeted government procurement to uphold the MSP.
That’s why a Price Stabilisation Revolving Fund needs to be established in each state, backed by the Centre, to ensure timely intervention. The priority should be for the 21 food crops currently under MSP along with key vegetables such as potato, tomato and onion. According to assessments, this fund would require no more than `5 lakh crore nationwide to support MSP at the Swaminathan Commission-recommended levels. If implemented efficiently, the annual burden on the exchequer would be `25,000 crore, which should be bearable given the problem and the size of the economy.
Legal guarantees for MSP can be strengthened by ensuring backward and forward linkages such as crop planning, building post-harvest infrastructure for storage, transportation and processing, and offering liberal pledge loans to manage post-harvest gluts in commodities.
The Pradhan Mantri Annadata Aay Sanrakshan Abhiyan, introduced in 2018, aimed to ensure effective procurement through the PSS while addressing price differentials via the Bhavantar Bhugtan Yojana. It also incentivised private traders to purchase at MSP and gave states the autonomy to buy crops in case of a price crash under the Market Assurance Scheme. While sidelined, these schemes have a significant potential to complement MSP legalisation.
Apart from paddy and wheat procured for the public distribution system , the procurement of other crops under MSP remains inadequate. A strategic realignment of procurement—while distributing food to over 81 crore people through the PDS, feeding 12 crore children daily via mid-day meal schemes and providing essential nutrition to Anganwadis—would address both hunger and malnutrition while ensuring income stability for farmers. For this, reorienting the National Food Security Act 2013 is crucial.
An analysis of retail markups over wholesale prices reveals that intermediaries capture a disproportionate share of the final price paid by consumers. While farmers often receive far less than the MSP at wholesale markets, consumers are forced to pay significantly more. For instance, rice prices in Karnataka see a 120 percent markup, gram prices in Tamil Nadu rise 130 percent, and onion prices in Madhya Pradesh surge 210 percent—far surpassing the Swaminathan Commission’s recommendation of a 50 percent margin over the total cost by the time they reach consumers. This stark disparity highlights a deeply entrenched system where farmers receive no more than 30 percent of the final price. Successive governments across party lines have conveniently retreated from their obligations on this front, allowing free-market forces to dominate policy since the 1990s’ reforms. However, in agriculture—where producers have little control over the prices they receive—legalising the MSP would guarantee farmers a fairer share.
The move would significantly reduce the profit margins of the intermediary classes including traders and agribusiness giants. But the ruling dispensation’s commitment to neoliberal policies has made government intervention increasingly unpalatable.
Legalising MSP is a crucial policy step to sustain farming, secure food production and ensure rural stability. The resolution of this issue depends on whether the government prioritises farmers’ welfare and the nation’s food security, or continues to favour market-driven policies driven by political expediency. The outcome of the talks with farm leaders will be shaped by this critical decision.
(Views are personal)
T N Prakash Kammardi | Agri-economist and former Chairman, Karnataka Agricultural Prices Commission