Is the minimum support price compromising agricultural exports?


What is MSP?

The minimum support price, or MSP is the price at which the government of India purchases crops from farmers irrespective of their market price. This was initially implemented in 1966-67 for wheat and was designed to protect farmers incomes in case they produced more than the market could absorb, a phenomenon that increasingly occurred in the wake of the Green Revolution. 

The main problem

Today, the government covers 25 grains and shoots within the ambit of the minimum support price including staples and essentials such as cotton, masoor, groundnut and jute. The question to ask however is why is the buffer stock not sold in international markets once domestic demand is satiated? In recent years, India’s revenue from agricultural exports has declined from $ 43.23 billion in 2013-14 to 33.87 billion $ in 2016-17. Simultaneously, imports of agricultural commodities have increased from 15.03 billion $ to 25.09 billion $ in the same time. The imports have principally constituted edible oils and pulses.

Yet even in laying aside the monetary losses incurred in the incorporation of a minimum support price, and the fact that it is adding to our trade deficit. Let us examine to what use the actual product has been put to. In the last three years alone the Food Corporation Of India (FCI) has allowed close to 50,000 tonnes of food grain to rot in warehouses across the country. According to the UN World Food Program 250,000 people die of hunger related causes every year in India. With the prevalence of such abject conditions of redistribution of buffer stock, it is hard to see the FCI’s efforts to redistribute the buffer stock as anything other than an utter calamity. In dealing with a perishable commodity such as food grains, it is perhaps time we ask whether  we actually require an order from the Supreme Court to distribute food grains from godowns to starving villagers. And given the tremendous wastefulness of the government with the resources in question, perhaps we may ask whether it is possible to set up private enterprises around the Public Distribution System.

What can be done?

Experiments have already been made in this direction. Mumbai’s dabba system for example supplies over 80 million lunches a year in one city alone. We do have examples, in this country of century old supply chains which are actually still growing at 5-10% a year. Is it possible for similar ventures to arise at a pan- Indian level to address the requirement of at least the redistribution of buffer stock if it’s sale in the open market is not feasible given the present conditions? It would certainly constitute an employment drive in its own right, something the present government has been hard pressed to provide our republic with.

A broader perspective

In addressing the question of agriculture more broadly however it is essential to recognize how our own economy has been changing, particularly around the generation of surplus value. For many years, India’s prime agricultural export was basmati rice. Climatic conditions enabled this crop to satiate domestic demand and then also be exported. India is the top exporter of basmati rice in the world. In 2016-17, the country exported 4,000,471.56 million tonnes worth 3,230.24 million $. To note however is that in the same era as when domestic beef consumption has been curtailed by the BJP government in power, beef exports from the country have skyrocketed. In recent years we have actually overtaken traditional exporters like Argentina and Brazil in beef exports having generated 3680 million $ in 2016. This means that today, beef exports are actually worth more than exports of basmati rice and this could be a strong indicator of how we may balance our trade deficit.