MSP hike, who are the winners and losers?

The recently announced hike in Minimum Support Prices is projected as a farmer empowering initiative. But, at a closer angle, the general term “farmer, reveals multiple layers with varying income and vulnerability characteristics. Which farmers gain the most? is the key question.

According to a National Sample Survey Office (NSSO) report that mapped the income, expenditure and indebtedness of agricultural households in India in 2013, for households owning farms of less than 0.4 hectares, who are a third of all agricultural households, net receipts from the cultivation account for less than a sixth of income. Obviously, the chances of them making benefits from higher MSPs are rare.

For those holding between 0.4 and 1 hectare, net receipts from cultivation are around two-fifths of their earnings. This class has also very thin chances of making it big from higher MSP rates. Which means, farmers owning up to 1 hectare of land constitute 69.4% of total agricultural households in India. The report finds their monthly consumption expenditure is higher than their earnings from all sources, a dangerous proposition which puts them in the noose of debt.

Their immediate option is local moneylenders, rich farmers and landlords. But, they are often forced to sell their produce to these financiers at lower than market prices. In short, almost 70% of farming households are unlikely to be the beneficiaries of higher MSP rates. On the other hand, those having more than 4 hectares of land, a mere 4.1% of the farming population, get more than three quarters of their net income from cultivation. This group makes the maximum gain out of farm loan waivers and higher MSPs.

According to the Shanta Kumar Committee report, a mere 5.8% of agricultural households in India had sold paddy or wheat to any procurement agency. Even these households sold only a part of their total sales, ranging from 14-35% for different crops, at MSP. Said the report. This scenario restricts the scope of loan waivers and MSPs into a minuscule of farmers and a few states.

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