Farmers' Protest: What is MSP and how would it work?

Farmers are back on the roads to demand a legal guarantee for Minimum Support Price (MSP) for their produce along with other demands, including implementation of the Swaminathan Commission's recommendations for farmer welfare, pensions for farmers and farm labourers etc.

The renewed wave of protests recalls their opposition to the three farm acts passed by Parliament in 2020, marked by unprecedented protests for over a year, culminating only after their demands were ceded to.

In a landmark address on November 19, 2021, Prime Minister Narendra Modi had said, "Our government brought in the new laws with good intention, full sincerity and complete dedication for the welfare of farmers, especially for small farmers, in the interest of agriculture and the country and for the bright future of the poor in villages. But we have not been able to explain to some farmers such a sacred thing which is absolutely pure and for the benefit of the farmers despite our efforts."

"Let us make a new beginning, let us start afresh," he added.

So, let's take a look at what MSP means and ways it could be implemented.

MSP is the rate at which the crops are purchased by the government from the farmers. It ensures the growers a minimum income for their produce, while serving as a safety net during times of market fluctuations. Back in 2020-21, when farmers were protesting against the farms laws, the assurance of MSP was one of the key conditions for them to withdraw their stir at Delhi borders.

President Droupadi Murmu recently highlighted that paddy and wheat farmers have received nearly Rs 18 lakh crore in the last 10 years as MSP, marking a 2.5-fold increase from the preceding decade. Additionally, farmers producing oilseeds and pulses have received over Rs 1.25 lakh crore in the last decade under the current government.

Currently, the government announces MSPs for 23 crops, including cereals, pulses, oilseeds, and commercial crops. However, MSP effectively benefits mainly rice and wheat farmers due to the government's extensive storage system for these grains, reported Economic Times.

There are three ways to guarantee MSP.

As reported by The Indian Express, the first option entails compelling buyers to pay MSP, but this could be challenging to implement.

The second option is for government agencies to buy all crops offered at MSP, which can pose challenges physically and fiscally and is largely unsustainable.

And, the third is Price Deficiency Payments (PDP), wherein the government pays farmers the difference between the market price and MSP if the former is lower, without having to physically purchase the crops.