1. Question for UPSC Mains-GS3 Paper
  2. Introduction (Origin of the problem)
  3. Conclusion (Summarize the body with +ve / -ve tone)
  4. Afterthoughts / Mistakes

Question for UPSC Mains-GS3 Paper

Q. What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low income trap? (150 words, 10 marks, asked in UPSC Mains-GS3-2018)

न्यूनतम समर्थन मूल्य (एम. एस. पी.) से आप क्या अंजते है ? न्यूनतम समर्थन मूल्य कृषको का निम्न-आय-फंदे से किस प्रकार बचाव करेगा?

Relevance to Syllabus of UPSC GSM3: Issues related to direct and indirect farm subsidies and minimum support prices.

Introduction (Origin of the problem)

We can start by giving “origin of the problem” that if free-market forces were sensitive to farmers then MSP was not necessary in the first place!

  • Under the APMC Acts, the first sale of agriculture commodity can occur at Agricultural Produce Market Committee (APMC) Mandis only.
  • However, a farmer may not get remunerative prices at the Mandi due to either of the following reasons:
    1. bumper production /supply which brings down the market prices AND / OR
    2. cartelization / price-fixing by the mandi-agents/merchants.
  • Hence, to protect the farmers, Government of India announces Minimum Support Price (MSP) before every crop sowing season.
Minimum Support Price (MSP)

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Body#1: What is MSP?

  • On the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP), Government of India declares minimum support prices before each sowing season for certain crops.
  • Government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
  • Thus, farmer always has the option to sell produce to government, if he can’t get remunerative prices from private merchants.

Body#2: How does MSP help farmers from Low-income trap?

i) Prevents Distress-Sale

  • National Bank for Agriculture & Rural Development’s (NABARD)‘s’ All India Rural Financial Inclusion Survey 2016-17 found that the average monthly income of an agriculture household is less Rs.9,000/- from all sources combined (cultivation, wage labour, animal husbandry.)
  • Thus, farmer rarely has surplus savings for buying inputs for the next cropping season. Access to credit (loans) is also difficult for small and marginal farmers.
  • So, if they are forced into distress-sale of produce at throw-away prices, they’ll not be able to buy high quality seeds, fertilizers, pesticides & tractor-rent for next cropping season, which will further decrease their income from the next cycle. MSP prevents this phenomenon.

ii) Helps to make informed decision

  • Government announces MSP before the sowing season for 23 crops including cereals, pulses, oilseeds & certain cash crops.
  • This advance information helps the farmer to make an informed decision about which crop to sow for maximum economic benefit within the limitations of his farm size, climate and irrigation facilities.

iii) Acts as a benchmark for private buyers

  • MSP sends a price-signal to market that if merchants don’t offer higher than MSP prices the farmer may not sell them his produce.
  • Thus it acts as an anchor or benchmark for agro-commodity market. While it doesn’t guarantee that market prices will also be higher than MSP, but atleast it ensures the market prices will not drastically lower than MSP. [e.g. IF Mandi-cartel-mafias offers wheat purchase price at 90% lower than MSP, then their political masters from ruling party will put pressure on them lest the media and opposition parties make an issue of it!]

For educational purpose, I’ve elaborated Body. You can compress in real exam.

Conclusion (Summarize the body with +ve / -ve tone)

Thus, MSP saves Indian farmers from low income traps in three ways (1) preventing distress sale (2) helping farmers to make informed decision about sowing (3) assuring farming as a profitable business activity.

  • [Conclude in Positive Tone] Hence, to further amplify the positive effects of MSP, Government has taken two notable initiatives in 2018 (1) Budget 2018-19 announced to keep MSP at least 1.5 times of their production cost (i.e. 50% profit) & (2) Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA) was announced to revamp the MSP procurement system. OR
  • [Conclude in Negative / Cautious Tone] But, previous Economic Surveys have observed that MSP procurement is not uniform across all states, a significant portion of pulses & oilseeds were sold below the MSP. Hence, reforming the MSP procurement system is need of the hour, If we want to double the farmers income by 2022.

Afterthoughts / Mistakes

  • Keep your focus / spotlight on farmer. Don’t write lengthy narration of HOW the APMC mandi agents exploit them by offering low prices and agents are untouchable due to political patronage so farmer sells carrots for 2 rupees a kilo which is then sold in retail for 20 rupees a kilo. All of that is correct but within 150 words limit, you’ve to be concise in your expression and keep spotlight on the keywords i.e. “farmer” and “income”.
  • You’re not asked to ‘critically examine’ the faults in MSP system, how it has led to excess production of rice and wheat at the expense of pulses and vegetables- which raises the inflation of daal & tomatoes, and excessive cultivation of paddy & sugercane dries up watertable etc. OR that MSP procurement not done vigorously in all parts of India so many farmers are still deprived of its benefits etc.
  • Don’t digress into how / why MSP alone is not sufficient, crop-insurance and irrigation are also equally important and then giving long list of schemes for these activities.
  • You’re not asked “HOW is MSP calculated?” No need for dissection of [A2+FL], C2 formulas.

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