What are the reasons for viability crisis in agriculture? Explain with special reference to Minimum Support Price Scheme.
There are several reasons that make Indian agriculture less viable including Small and fragmented land-holdings; quality seeds and low seed replacement ratio; fertilizers and irrigation policy; lack of mechanization; issues in marketing, inadequate storage facilties etc. However, MSP scheme is peculiar because its intention is to provide direct support to cultivators.
Though government carries out the ritual of announcing MSP every year, public procurement operations do not reach all farmers and all crops, even for commodities with officially declared MSPs. There are regions of the country where the procurement programme is not accessible to many farmers. Government procurement at the minimum support price is supposed to protect the farmer. But it mainly benefits the large traders who sell grain to the government. Small farmers do not have enough crop production to justify the cost of transporting the crop to government corporations.
Further, the inputs required for agriculture are rising faster than the sales price which makes agriculture as less remunerative sector. Except for Wheat and Rice, states have to use their own funds to support MSP for other crops. But cash-strapped states are rarely in a position to procure the crops.
Even though states enter in market it would kept cap on minimum Quantity of procurement. For example Haryana state government procure sunflower seeds from farmers but it will procure from each farmer 25% of their harvest, up to a limit of 25 quintals per farmer.
Gradual liberalisation of trade in agricultural commodities has increasingly linked domestic to international prices. Therefore fall in domestic prices will affect Indian farmers.
In poor harvest year’s farmers are not necessarily compensated by an increase in crop prices, while in bumper years low prices would hit their net incomes, depending on how global prices move.