Minimum Support Prices in India: Distilling the Facts

In re­cent years in India, min­i­mum sup­port price (MSP) and gov­ern­ment pro­cure­ment, es­pe­cially of paddy and wheat, have been dis­cussed widely, but these dis­cus­sions have often drawn on ev­i­dence that is dated and in­com­plete. Con­se­quently, such dis­cus­sions have clouded the facts, re­sult­ing in a large num­ber of fac­toids. Ac­cord­ing to these pop­u­lar mis­con­cep­tions, very few farm­ers (6 per cent only) ben­e­fit from MSP and gov­ern­ment pro­cure­ment, only large farm­ers ben­e­fit, and only farm­ers of Pun­jab and Haryana (and, to some ex­tent, west­ern Uttar Pradesh) ben­e­fit. In this ar­ti­cle, we ex­am­ine these three fac­toids and draw on mul­ti­ple data sources to dis­til the facts. We argue that the ex­ist­ing ev­i­dence sug­gests a more com­plex pic­ture: (1) MSP im­pacts 13 per cent of paddy sell­ers and 16 per cent of wheat sell­ers; (2) the ge­o­gra­phies of pro­cure­ment have ex­panded to new States in­clud­ing, no­tably, Mad­hya Pradesh, Chhat­tis­garh, and Odisha; and (3) al­though at the na­tional level there is a bias to­wards large farm­ers, this does not imply ex­clu­sion of small and mar­ginal farm­ers. In fact, a ma­jor­ity of the ben­e­fi­cia­ries are mar­ginal and small farm­ers on both the ex­ten­sive and the in­ten­sive mar­gins. Fur­ther, we find sub­stan­tial het­ero­gene­ity by States. Haryana, for in­stance, has a bias in favour of small and mar­ginal farm­ers. We con­clude that de­bates on MSP and pro­cure­ment must there­fore take into ac­count the changed ge­og­ra­phy of pro­cure­ment and the pro­file of sell­ers, and recog­nise the di­ver­sity of ex­pe­ri­ences re­lat­ing to pro­cure­ment across States.