Farm Bills: MSP is there, will be there, says Finance Minister Nirmala Sitharaman

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October 7, 2020 6:15 AM

As FE had reported, Punjab levies an aggregate tax of 8.5% of the MSP at which the FCI and other agencies buy grains. Haryana is not far behind with an aggregate levy of 6.5%. The pan-India average is to the tune of 6% of MSP.

“I find that absolutely unreasonable to keep speculating on it and say that this is the concern of the farmer. MSP is there, it was there and it shall continue to be there,” she added.“I find that absolutely unreasonable to keep speculating on it and say that this is the concern of the farmer. MSP is there, it was there and it shall continue to be there,” she added.

Finance Minister Nirmala Sitharaman on Tuesday highlighted the government’s resolve to continue with the practice of announcing the benchmark prices of select crops and procurement, seeking to debunk the Opposition’s criticism that the Centre is trying to abdicate its purchase responsibility through two farm Bills cleared by the Parliament last month.

Speaking to reporters in Chennai, Sitharaman defended the new laws, which seek to offer farmers unfettered access to the markets, and asserted that the Centre has no plan to scrap the MSP (minimum support price) system. “I find that absolutely unreasonable to keep speculating on it and say that this is the concern of the farmer. MSP is there, it was there and it shall continue to be there,” she added.

Sitharaman said that under ‘certain other governments’, the focus was only increasing the MSP (and procurement) for paddy and wheat, and they did not bother about other crops. Over a period of time, it contributed to a distortion in the cropping pattern across the country.

All these years, the farmers were bound to sell at certain designated mandis, even if the price there was not right for them, she said, adding that the new Bills give them more choices now.

“The MSP was not there for vegetables and fruits which are highly perishable items. We have seen, soon after the harvest the prices of items will go down and soon after the prices will go up. We have also seen farmers throwing their produce like tomatoes on the road for not getting even their production cost,” Sitharaman said. Importantly, states used to impose levies of up to 8.5% on procurement, she added.

As FE had reported, Punjab levies an aggregate tax of 8.5% of the MSP at which the FCI and other agencies buy grains. Haryana is not far behind with an aggregate levy of 6.5%. The pan-India average is to the tune of 6% of MSP.

Speaking at the Indian Express Group’s Idea Exchange programme recently, agriculture minister Narendra Singh Tomar had ruled out the possibility of bringing the MSP system for farm goods under the new Bills. However, he also refuted the Opposition’s claim that the reforms proposed in the Bills would kill the APMC mandis and the system of MSPs.

The Bills had little to do with the MSP system or government procurement of agriculture commodities, Tomar had stressed. MSPs were administrative measures and these had never been part of any law.

However, although the Centre announces MSPs of 22 crops every year, the official procurement is limited to just 10 – wheat, paddy, masur, urad, moong, arhar, mustard, gram, groundnut and cotton. Of course, there has been some improvement in procurement at MSPs over the last five years. The total procurement of nine crops (barring cotton) in 2013-14 was 61 million tonne, which increased to nearly 114 million tonne in 2019-20.

A recent FE analysis of nine crops with MSPs showed that pan-India average mandi prices of three out of four rabi crops were 2-17% below their MSPs while only masur was 1% above MSP during the harvesting period (March-June). Similarly, five out of six kharif crops were 3-17% below their MSPs during harvesting period (October-January) and only paddy was 3.5% above MSP.

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