Demand for Legalising MSP
Source: India Today
GS II: Government policies and interventions for development in various sectors and issues arising out of their design and implementation
Overview
- News in Brief
- What is the Minimum Support Price (MSP)?
- Why Demand for Legalising MSP?
- What are the arguments against the Demand for Legalising MSP?
Why in the News?
Over 200 farmers’ unions, predominantly from Punjab, have begun a march towards Delhi.
News in Brief
- The “Dilli Chalo” march encapsulates the widespread discontent among farmers towards the government’s reluctance to ensure a Minimum Support Price (MSP) by law.
What is the Minimum Support Price (MSP)?
- Distortion of Market Forces
- Legalizing MSP could distort market forces by artificially setting a price floor for certain crops.
- This can lead to overproduction of MSP-supported crops and underinvestment in more profitable or environmentally sustainable alternatives.
- It may also discourage farmers from diversifying into crops with higher market demand or better suited to local agro-climatic conditions.
- Fiscal Burden
- Formalizing MSP into law could place a significant fiscal burden on the government, especially during years of bumper harvests when procurement costs escalate.
- This could strain government finances and limit resources available for other crucial sectors such as health, education, and infrastructure.
- Inefficiencies in Procurement
- Legalizing MSP may perpetuate inefficiencies in government procurement systems.
- Procuring crops at MSP rates often involves bureaucratic hurdles, delays, and corruption, leading to wastage and resource misallocation.
- This can undermine the objective of providing timely and adequate support to farmers.
- Market Distortions and Trade Disputes
- Setting MSP as a legal requirement could distort domestic and international trade dynamics.
- It may lead to trade disputes with other countries, especially if MSP-supported crops are exported at prices below international market rates, triggering accusations of dumping or unfair trade practices.
- Inhibiting Innovation and Adaptation
- Legalizing MSP may disincentivize innovation and technological adaptation in agriculture.
- Farmers may become complacent with guaranteed prices, reducing their incentive to adopt modern farming practices, improve productivity, or invest in research and development.
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