ANSWER

• INTRODUCTION : A brief introduction to MSP
• BODY :
  • Speak about Advantages and disadvantages of MSP
  • Suggest a way forward for disadvantages
• CONCLUSION : A short conclusion

MSP is a form of government intervention to insure the farmers against a steep decline in the prices of their goods and to help them prevent losses. The government of India sets the MSP twice a year for 24 commodities.

Advantages of MSP

• Ensures adequate food grain production in the country and hence, maintaining the food security.
• Protects the farmers from any sharp fluctuations in price. MSP is announced before the sowing season so that the farmers can make an informed decision.
• Increases the farmers' income and when they have more disposable income in hand, they can invest in new technology. It also helps in achieving the Government's goal of doubling farmers income by the year 2022.
• Acts as a surety for farmers that their produce will get a fair amount and hence encourages them.

MSP does not end the agrarian distress because of the following reasons:

• Mechanically finalizing MSP with regards to the cost of production alone does not seems proper. One needs to consider several factors such as its impact on cost of living, world market rate, change in raw materials cost and availability to name a few.
• Increasing MSP would result in farmers giving their produce to the govt. agencies like FCI, which would result in increase in dumping of food grains in govt. go downs than making them available in consumer market.
• Increasing MSP would lead to increase in cost of other consumer goods which would again result in poverty.
• MSP will not benefit for the long term. It will only provide marginal increase in profit for a short time.
• A lot of illiterate farmers who do not have adequate knowledge about the Minimum Support Price end up being exploited by middlemen.
• Not all farmers have equal access to the benefits given by the government through MSP. Several regions in the country do not have effective implementation of the scheme.
• Government interference in the market is seen as killing of the competition which disturbs the working of open markets.
• Criticised by various countries at the WTO on the grounds of being highly trade-distorting by its method of calculation. developed countries are unhappy with Indian subsidies as evident from the Doha development round talks. They are pressurizing India to reduce subsidies.
• Raised the maintenance cost of procuring food grains by the government. Rising transportation and storage costs of the FCI are other contributing factors in this increase. This rising cost affects the investment in the other sectors like agri-infrastructure.

In order to improve the MSP procurement system and make it more effective, the following recommendations are offered:

• First and foremost the awareness among the farmers needs to be increased and the information disseminated at the lowest level so that the knowledge would increase the bargaining power of the farmers.
• The basic source of livelihood for the farmers is farming and the delay in payment has a negative effect. The delay in payment needs to be corrected and immediate payment should be ensured. For sustainability of farming prompt payment at remunerative rates should be made.
• It has been found that MSP rates are announced after the sowing season begins or at the time when the farmers have already initiated the necessary preparation for sowing a particular crop. Rather, as intended by the policy makers, MSP should be announced well in advance of the sowing season so as to enable the farmers to plan their cropping.
• The farmers should receive their MSP rate in case on the spot the same day, so that they will be encouraged to improve their production and create more marketable surplus.