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Here’s why farmers fear states may scrap MSP under new laws India News

What is the minimum support price (MSP)?
A stable price environment is considered important to boost agricultural production. To achieve this, a central government agency, the Agricultural Prices and Costs Commission (CACP), recommends MSP for 23 commodities. The MSP is decided on the basis of seven criteria, of which the cost of production is the most important.
MSP is part of the package to ensure food safety and maintain adequate food stocks in the public distribution system. After harvest, Central India Food Corporation (FCI) purchases commodities from MSP for use at PDS.
In practice, PEM and procurement are effective only for two commodities, rice and wheat.
Can all farmers sell at MSP?
No. Only 12% of rice farmers, for example, benefit from acquisitions at MSP. This is because the effort made by state governments influences where the grain is purchased. Last mile aggregation is often done by state governments. Where they have been successful, farmers benefit the most. But the purchase invoice is paid by the Center.
In Punjab, more than 95% of rice farmers benefit from MSP, while in UP only 3.6% of farmers benefit.
What are they Agricultural product marketing committees (APMC)?
They are physical markets regulated by the respective state governments under the APMC Law. These laws are not uniform in all states. The Center told Lok Sabha in March 2017 that India has 6,630 CMPAs. On average, an APMC serves a geographic area of ​​496 square kilometers. Typically, only stocks that are taken to APMC and other designated purchasing centers are purchased from MSP.
Does MSP make a difference for the farmer?
In the case of rice, the average market price of rice remained below the MSP during the last five seasons. In the case of wheat, there was much more convergence of market price and MSP. However, CACP data shows that where MSP operates, as in Punjab, the market price tends to coincide with it. Where acquisitions in MSP are limited, such as UP and West Bengal, the market price is most days below MSP. When the procurement system works well, it seems to favor all farmers, as the market price and the PEM largely converge.
What are the new core farm laws?
It is a package that dilutes essential commodity regulations, helps contract farming, and provides for the creation of new agricultural markets under the core legislation as competition for CMPA.
The last part, which is called the Law of Trade and Commerce (Promotion and Facilitation) of Agricultural Products, is the one that has caused anxiety. Creates a completely new market space with virtually no barriers to entry for merchants. But more importantly, it does not foresee taxes or levies on transactions.
Why should farmers not welcome competition?
Going back to the MSP system, it works well where states have made the effort. They generally collect taxes on acquisitions that can be used to provide infrastructure. Punjab and Haryana, for example, charge an independent rural development fee of 3% and 2% respectively. The fear stems from the possibility that if there are two markets that buy the same commodities but only one of them charges a tax, then trade will inevitably shift to the one without it.
The fear appears to be that states without sufficient tax revenue or resources may not be willing to keep the existing MSP system running.
For other products such as fruits and vegetables, most states had previously eliminated the legal monopoly originally held by the APMCs. By 2019, 17 states had eliminated the APMC’s fruit and vegetable monopoly and 19 had provided for contract farming in their respective APMC laws.
If MSPs have caused environmental damage in Punjab and Haryana and lowered the water table, why aren’t farmers switching to other crops?
The collateral damage of the current system is widely recognized, even by farmers. The reluctance to switch to a cereal with less use of resources such as corn is due to the fact that the prices are not remunerative. The CACP admits that farmers in Punjab and Haryana have no incentive to change.
The appeal of the current PEM system to farmers is best evidenced by trends in Madhya Pradesh, the rising star in the procurement system. In MP, the state government purchases wheat and rice. This year, MP surpassed Punjab in buying wheat, topping the list. More importantly, in just two years, the purchase of wheat at MSP in the state has increased from 46% of total production to 70% of production.
Other states have joined the bandwagon. In 2018-19, 9.7 million farmers benefited from purchasing rice at the MSP, an increase of 34.2% in one year. Most of the new beneficiaries came from states such as Chhattisgarh, Telangana, UP and West Bengal.

Times of India