MSP Guarantee and Crop Diversification | Mahabir S. Jaglan, Narender Kumar

Recent offer of Central Government ministers to agitating Punjab farmers where they sought to link minimum support price (MSP) guarantee with crop diversification has opened a new debate on the link between these two issues. The proposal says that if paddy and wheat farmers shift to cultivation of five crops namely maize, cotton, masoor, urd and tur then the central food procurement agencies, NAFED (National Agricultural Co-operative Marketing Federation of India), NCCF (National Co-operative Consumer Federation of India) and CCI (Cotton Corporation of India) would offer a five year contract to them to purchase these crops on MSP for a period of five years. The agitating farmers, however, have rejected this offer on the ground of its inefficacy to address their real problem. They opine that this offer is meant only for paddy and wheat farmers and that too with the condition of diversification in the favour of selected five crops instead of all the 23 crops which are covered under MSP scheme of Commission for Agricultural Costs and Prices (CACP). Furthermore, this proposal seems to have been offered to placate the paddy-wheat farmers of Punjab. But the farmers say that their demand is to secure MSP guarantee to all the farmers of India. However, since the proposal in a way links MSP with the crop diversification, it has attracted the attention of various social scientists and ecologists and some of them opine that the proposal may prove to be a credible effort to addresses both the agricultural as well as ecological crisis looming large over the agricultural landscape of India.

An empirical study conducted by us to examine the response of crop acreage to price in Haryana offers a perspective on the issue of linkage between MSP guarantee and crop diversification. The study has assessed the influence of previous year farm harvest price (grain market price during harvesting season) on the acreage of six main crops during the following year. It covers the period of 16 years (2004-05 to 2019-20) and three agro-eco regions of Haryana namely the Wheat-Rice Region, Wheat-Cotton Region, and Mixed-Crop Region. It evaluates the trend of gap between farm harvest price and MSP of 3 Kharif crops (paddy, cotton and bajra) and 3 Rabi crops (wheat, mustard and gram). Among these only two crops, paddy and wheat are fully procured by government agencies on MSP. It has been hypothesized that the farmers generally allocate more land to the crop having higher price during previous year.

The study brings out that over this period the farm harvest prices of the fully procured crops (paddy and wheat) have increased consistently and remained higher than their MSP. The annual mean positive deviation of farm harvest price from MSP for these two crops is ₹9.1/q and ₹2.1/q respectively. Contrary to this, the non-procured crops bajra, cotton, mustard and gram showed greater fluctuations in their farm harvest prices as these are largely dependent on the commodity demand in the market. These crops have recorded much higher positive deviation of farm harvest prices from MSP than procured crops. Furthermore, all the 6 crops have recorded significant increase in their farm harvest prices during the period 2004-05 to 2019-20. Paddy has recorded the highest compound annual growth rate of farm harvest prices (8.90 percent) followed by bajra (8.37 percent), cotton (7.95 percent), wheat (7.07 percent), gram (6.82 percent), and mustard (6.63 percent).

But despite the significant growth in prices of all six crops, only three crops, paddy, cotton and wheat, have shown the positive compound annual growth of their area. Area under remaining three crops (bajra, mustard and gram) has rather declined over the study period. The paddy acreage has increased impressively in Mixed-Crop Region (6.05 percent) and Wheat-Cotton Region (5.13 percent). The cotton acreage has increased only in Mixed-Crop Region (6.50 percent) and it has rather declined in the traditional cotton growing area (Wheat-Cotton Region). Area under wheat cultivation has expanded cross all three agro-eco regions of the state but sluggishly (0.64 percent).

Regression analysis also reveals that it is only the acreage of paddy, cotton and wheat that are positively associated with the prices. The beta coefficient values of all these crops are significant at 1 percent level. Paddy acreage shows good response to price with a moderate R² value (0.43) and having not much variation across the three agro-eco regions of the state. Having the overall R² value 0.56, cotton acreage has also responded very well to price only in the Mixed Crop Region. Among the Rabi crops, it is only the wheat acreage that shows positive response to the price across all the agro-eco regions in the state. The overall R² value for wheat is 0.65 and among the agro-eco regions it is highest (0.85) in the Wheat-Rice Region. The beta coefficients of bajra, mustard and gram are negative.

So, why only paddy, cotton and wheat area have responded to their respective market prices? It’s only the farmers of Mixed-Crop Region who have responded to cotton price for its cultivation. It is a low rainfall area with limited irrigation facilities. In the eventuality of declining farm income the farmers in this region during Kharif season have opportunity to grow only a commercial crop like cotton that requires less soil moisture. But in the traditional cotton growing area rather than cotton the farmers have responded favourably to paddy. In fact, paddy and wheat remain the first choice of the farmers in all three agro-eco regions of the state for the simple reason that they are being purchased on the guaranteed MSP through procurement. Despite the significant growth in the prices during previous year the farmers have not increased the acreage of bajra, mustard and gram as they were unsure of selling their produce at remunerative price. It may be deduced from the preceding discussion that farmers would go for the cultivation of crops different from paddy and wheat provided they get guaranteed remunerative prices. And for that government need not to incentivize or specify as which crop has to be replaced by which one. The farmers are wise enough to choose the crops for diversification keeping in view the agro-ecological conditions of the region provided they are guaranteed remunerative prices of their produce.

(Authors: Mahabir S. Jaglan, Former Professor, Department of Geography, Kurukshetra University, Kurukshetra, Haryana; Narender Kumar, Research Scholar, Department of Geography, Kurukshetra University, Kurukshetra, Haryana )