While announcing new minimum support prices (MSP) for the farmers, Union Agriculture Minister Shivraj Singh Chouhan recently said, “Giving fair prices to farmers is the top priority of the government and today new MSP rates have been announced accordingly.”
So, let us examine whether the revised MSP rates actually translate into more money in the farmers’ hands.
But the basics first. The revised MSP for wheat is Rs. 2,425 per quintal compared Rs 2,275 from last year, that translates into a 6.59% increase.
The updated MSP for barley this year is Rs. 1,980, which was Rs 1,850 last year. The MSP for gram is Rs. 5,650, lentil (masur) is Rs. 6,700. Rapeseed and mustard were set at Rs. 5,990, and safflower at Rs. 5,940 Overall the increase range was from 2.41% to 7.03%.
The MSP for Barley saw the maximum increase of around 7.03%.
Increase in MSP doesn’t translate to fair price for farmers
Now lets us look at inflation. India’s consumer price index inflation rose to 5.49 per cent in September 2024. If we analyse the year on year inflation calculated on All India Consumer Food Price Index (CFPI), it falls to 9.24% (Provisional) for September. Judging by this metric, the rural and urban areas have 9.08% and 9.56% inflation rate in September. In simple terms, inflation is more than the increase in MSP our government has proposed.
The increases only cushions the inflationary blow and is far from getting farmers a “fair price”.
So, has have a policy makers made a mistake? Not quite, as the government’s Commission of Agricultural Costs and Produce (CACP), which recommends MSP to the government, has already done an analysis and recommended to the government for all Rabi crops (which include all the crops mentioned above) a 5.3% increase from 2024-25 to 2023-24 in the composite input price index. This index collates costs from human labour to irrigation incurred in growing the crops.
Even if we look at the issue from Swaminathan formula (C2+50%) the prices of wheat should be Rs. 2,580, Barley Rs. 2,606.50, gram Rs. 6,993, masur. Rs 7,591.50 and mustard Rs. 6,441. As per its promise, if the government did implement the Swaminathan Committee report, wheat farmers would get an additional Rs. 155, barley farmers Rs. 625.50, gram farmers Rs. 1,343, masur farmers Rs. 1,166.50 and mustard farmers Rs. 791 per quintal.
As demonstrated, if we evaluate the revised MSPs with respect to general inflation trends, input cost price index and through the eyes of the Swaminathan formula its fails on the promise of the “fair price”.
At the best, the government is only trying to keep up with inflation trends, and encouraging the farmers for higher production especially in wheat and oilseeds. If we cancel out the inflation, the increase is barely 1.1% – 1.6% for two crops – wheat – 6.6% and barley – 7%, whereas for all the other four crops, the increase in MSP is much lesser than the increase in inflation.
Procurement is less than previous years
From the technical perspective, lets move to implementation. One must ask the question how many farmers get the MSP and for which all crops? During the current Rabi (2024-25) season, the government procured 26.6 million tonnes of wheat, benefiting 2.2 million farmers. This marks a decline in wheat procurement compared to the peak of 43.34 million tonnes in Rabi Marketing Season (RMS) 2021-22.
Further, as per the report by the Commission for Agricultural Costs & Prices (CACP), 2.2 million wheat farmers, 1,13,000 lentil farmers, 5,00,000 mustard farmers, and 15,409 gram farmers have benefited from the MSP in the ongoing RMS 2024-25.
In RMS 2022-23 and RMS 2023-24, 1.168 million and 1.029 million gram farmers benefited from the MSP, respectively. Currently in the 2024-25 RMS 28,28,409 farmers have benefited from the program. And even if we look at the previous rates, what percentage of our farming population actually gets the Rabi MSP?
While official statistics give contradictory answers, we must rely on the last Agriculture Census for 2015-16, that placed the total “operational holdings” in India at 146.45 million. Given ten years have passed and the COVID lockdown has pushed people back into farming, this number could be much higher. So it would be fair to say that “fair price” never reaches the majority of Indian farmers.
Corruption, commission are major challenges
Till now, we have only analysed facts presented to us by the government. Taking a closer look on the on ground procurement, it becomes clear that corruption eats heavily into procurement process too. The government procurement ( via FCI, co-operative societies, etc) is marred by commissions and corruption allegations.
Even states like Haryana, Telanagana, Karnataka, etc have reported procurement scams and corruption. As a result, the procurement system is not tight enough and leakage or manipulation directly change the money reaching the farmers’ pocket.
Farmers often report of backlogs at the centres or the fact that a hefty commission needs to be paid to just walk in the door of the godown. The majority of farmers who on paper receive the full MSP, are actually only getting it after paying commissions or undergoing “ extra some expenses”.
It is clear that despite proposed increases in the MSP each year, the full amount never reaches the farmers. For crops which are not procured by the government, the situation is more dire because the MSP price recommendation is overpowered by market trends. The only way out for the government to ensure “fair price” reaches its farmers is to clean up the procurement systems and also having a larger procurement program covering more crops including fodder crops using a non-recursive loan to procurement agencies like FCI, NAFED, state bodies, etc.
This way the expense to the treasury would also be nil and the probability of fair price reaching farmers would be much higher.
Indra Shekhar Singh is an independent agri-policy analyst and writer. He was the former director for policy and outreach at NSAI. He also hosts The Wire’s agriculture talk show, Krishi ki Baat/Farm Talks. He posts on X @indrassingh.
