Editorial. AP’s new Bill to legally enforce MSPs not a good idea

Some public policy issues in India have defied a solution for decades, but crop up as poll planks whenever elections are round the corner. The idea of a guaranteed Minimum Support Price (MSP) for farmers’ produce is one of them. Over the years, regimes both at the Centre and States have frequently assured farmers that they will legally guarantee MSPs. But they’ve failed to walk the talk due to practical difficulties. Even where the State has tried to enforce MSPs through procurement by its agencies, market forces have depressed prices below MSP — in locations and at times where the agencies aren’t active.

The Andhra Pradesh (AP) government is now trying a novel approach through its draft AP Farmer’s Produce Support Price Act 2023. This Bill aims to safeguard farmers by decreeing that no transaction in farm produce within the State can take place below MSP. MSPs will be fixed not just for agricultural produce, but also for horticulture, aquaculture, sericulture and animal husbandry products. An apex committee will be set up to set MSPs not lower than the Centre’s support prices. Every transaction will require prior intimation to village-level Rythu Bharosa Kendras which will facilitate it.

There are many good reasons why the proposed law may not deliver on its laudable objective of improving the farmers’ lot. While the State may decree that no farmer should sell below MSP, buyers of farm produce are likely to go by demand-supply dynamics. Should the State fix unrealistic MSPs, buyers can stay entirely off the market, while they procure from markets outside AP. The decision on whether to liquidate his crop at a particular price is a commercial call for the farmer, to be made based on his personal exigencies, demand, inventories, perishability of his produce, fresh crop arrivals, etc. Freezing transactions except at a certain price, will deprive the farmer of the ability to raise cash when he desperately needs it. Shutting out free market signals will prevent farmers from aligning their cropping plans to market needs.

Then, there is also the question of how the enforcement machinery will work in practice. With a labyrinthine bureaucracy being set up to enforce this law, the market for farm produce in AP risks being logjammed by red tape. The State proposes to appoint multitudes of controlling authorities. Inspectors will be empowered to make random visits to any location where agri transactions take place, with search and seizure powers. Officers can prohibit sales and even jail people for repeat violations. This structure is likely to make farmers victims of rent-seeking. There are no easy fixes to ensuring that farmers get a remunerative price. But the answer to the problem lies not in state controls, but in dismantling extant controls on the free movement and marketing of produce, encouraging value-addition and having State and Central policies that facilitate uninterrupted exports.

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