India: NITI Aayog finalising details for MSP plan

  • Prime Minister Narendra Modi pledged to double farm incomes by 2022. The most cost-effective way of fulfilling that may be by compensating farmers with cash when market prices of crops fall below support rates, a government adviser said.
  • The plan is one among three suggestions being discussed by the NITI Aayog, which has been tasked to find ways to ensure farmers’ get at least 50% more than the production cost for their crops even when prices slump.
  • The two other options are the purchase of crops by government agencies at support prices and providing incentives to private companies to directly buy from farmers, said Ramesh Chand, a member of the think tank.
  • Although all the three options being debated by NITI Aayog have got their own advantages and disadvantages, an argument against the price compensation model is that traders might try to intentionally depress crop prices. However, the central Indian state of Madhya Pradesh is already running such a program and its experience shows that such a situation may not materialise, Chand said.
  • The NITI Aayog’s proposals could be sent to the Indian cabinet before Sep 18 for a decision so that a selected program could be implemented before the harvesting of monsoon-sown crops from Oct 18.
  • The move may help Modi in getting re-elected in 2019 as farmers are a key support base for political parties where about 800 million of the 1.3 billion population depend directly or indirectly on agriculture for their livelihood.
  • Although the government regularly announces purchase prices for about two dozen crops, it buys only small quantities of the commodities, except wheat and rice. Prices of many crops have fallen below the rates due to bumper harvests in recent years, triggering farmer protests.
  • Prices of most agricultural goods drop especially during harvests as the government, which sets guaranteed rates for various crops, doesn’t procure enough. Farmers have been demanding that it should introduce a mechanism to either ensure support prices by purchasing enough quantities or directly compensate them for their potential losses.
  • Nearly 22% of Indians live below the official poverty line, while about half of farming households are indebted in spite of guaranteed prices by the federal government on at least three crops — wheat, rice and cotton.


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