Farmer Protest 2.0: Some Questions and Answers
So, the Farmers Protest 2.0 is still raging, and as it stands, the central government is negotiating with the farmers. What exactly do the farmers want? Are their demands reasonable and justified?
What is MSP?
One of the main demands of the farmers is a guaranteed MSP (Minimum Selling Price). MSP means Minimum Support Price, which is the guaranteed price that a farmer gets for his crop. MSP serves as a kind of insurance on the crops for the farmers. This means that the market forces of demand and supply will have no impact on the price of the crops.
How does the MSP mechanism work currently?
The MSP of a crop is decided by the government based on recommendations provided by the Commission for Agriculture Costs and Prices (CCAP). As of now, 23crops are procured under MSP
How many farmers benefit from the current MSP mechanism? MSP effectively benefits mainly rice and wheat farmers due to the government’s extensive storage system for these grains. Currently, only 6% of the farmers in India benefit from MSP, and they are mainly concentrated in Punjab and Haryana.
What are the demands of the farmers?
The main demand is a law guaranteeing MSP for all the crops. Apart from this, they have several other demands, such as pensions to farmers and farm labor, withdrawal from WTO, and others that are unviable
What are the cost implications of the demands?
If an MSP guarantee law is introduced, the government will have to spend an additional ₹10 lakh crore annually. This figure alone is sufficient for anyone to know that the MSP demand is financially unviable To put things in perspective, the amount allocated by the government for infrastructure development in the recent interim budget is ₹11.1 lakh crore.
What about the other demands of the farmers?
Another demand that would make a big hole in the exchequer is the demand for a pension of ₹10,000 every month. The annual total cost of this pension scheme the farmers are demanding would be close to ₹12 lakh crore. They have also demanded an expanded MGNREGA, which would cost the exchequer between ₹ 5 lakh crore and ₹ 8 lakh crore. These three demands alone would cost the country around ₹ 30 lakh crore. To put this figure into perspective, the total expenditure estimated as per our budget is ₹ 48 lakh crore.
Is a fixed MSP beneficial for the nation if it has the financial resources to support it?
Private Players: A fixed MSP would discourage private companies from entering the market in times of excess production and a decline in market prices. This is because they would not be able to procure the produce at lower prices, as doing so would then be a punishable offense. Consequently, farmers might end up disposing of their excess produce, unable to sell it. The primary victims of such a situation would be smaller farmers, who constitute 94% of farmers across the nation
Inflation: Procurement at higher prices would lead to increased prices, which would affect the poor
Exports: Exports will be adversely affected if the MSP prices are above the international market prices.
Corruption: Needless to say, this would lead to increased corruption across the board. Migration: Implementing their demand for an increase in wages in MGNREGA would disincentivize migrant workers from other north Indian states from moving to Punjab and Haryana. This is because the wage demanded of ₹700 is almost twice the MGNREGA wage in Haryana, and more than three times the rate in Bihar, UP, and Odisha. This will eventually have a severe adverse impact on farming in Punjab and Haryana, as they might struggle to find farm labor.
Conclusion
The current MSP regime has already had a severe negative impact on the ecology in those regions. Distorted cropping patterns, destruction of biodiversity, depleting groundwater levels, soil degradation, and the smog issue that we all see very often at a certain time during the year are all direct outcomes of the current MSP mechanism.
The farm laws introduced by the government were an attempt to correct these wrong practices. The farm laws would have benefited farmers across the country, as opposed to the 6% in Punjab and Haryana who benefit from the current MSP mechanism. However, as we all know, the government eventually bowed down and revoked them.
The Farmer Protest 2.0 is an effort by wealthy farmers, middlemen and other external forces to put pressure on the government, especially with the general elections around the corner. I am sure that, like many such instances in the past, the government will work its way through this as well.
