India needs alternative means to ensure food security

Prof. Vijay Laxmi Pandey, Indira Gandhi Institute of Development Research, argues that MSP’s effectiveness is observed only in a few states and for a few food crops, like rice, wheat and now pulses. The MSP acts as a disincentive for crop diversification in states where it is effective and causes many environment-related problems. Alternative means of ensuring national food security and incentives for crop diversification should be adopted.

Prof. Vijay Laxmi Pandey

IBT: What is your view on how the three recently introduced farm ordinances will impact the Indian agriculture sector?

Vijay Laxmi Pandey: These bills are going to have an overall positive impact on Indian agriculture. We can expect better price discoveries for the farmers due to many avenues for selling their produce. The APMC mandis will now have to be more competitive and efficient, and they will have to provide better services to the farmers. It will incentivise private sector investment in agriculture in the form of new and enabling technologies, cold storages, warehouses and other infrastructure that will make agriculture more profitable. The forward and backward linkages will be strengthened. It will also lead to an increase in non-farm employment opportunities in rural areas. Farmers will be able to minimize their price risk by having enforceable contracts for specific crops.

Corporate sector participation can help in an integrated development of the agriculture sector. The government should go for more investments in PPP mode. However, better oversight and regulations are needed to avoid corporatisation.

IBT: A major fear being cited is the possible removal of the MSP regime? How have the MSP provisions fared for farmers over the years? Do you think the same support is sustainable and viable in future as well? Why or why not?

Vijay Laxmi Pandey: There is no provision in these bills for removal or withdrawal of MSP. The government has clarified it and has already announced MSP for rabi crops.

The main use of MSP at present is for maintaining buffer stocks for national food security. MSP’s effectiveness is observed only in a few states and for a few crops, like rice, wheat and now pulses. In most states, the MSP awareness is very low, even for rice and wheat. The MSP acts as a disincentive for crop diversification in states where it is effective and causes many environment-related problems. Alternative means of ensuring national food security and incentives for crop diversification should be adopted.

IBT: Given that the majority of Indian farmers have marginal land, how will they be able to ensure that they meet corporate requirements in terms of both quantity and quality? Will farmers have the necessary bargaining power? What are the challenges they could face vis-à-vis contract farming?

Vijay Laxmi Pandey: The small and marginal farmers signing contracts with the companies will have a very high probability of getting support in acquiring quality inputs, technology and know-how to improve the quality and quantity of their produce. It will be a win-win situation for both sides. For bargaining power, they will have to come forward as farmers’ collective such as FPOs, or farmers’ cooperatives. The government has already made an announcement for the formation and promotion of 10,000 new FPOs.

Farmers could, however, face challenges in forming the collectives and sustaining them. They could also face difficulties in dispute settlement with the companies. The bill leaves out the issues of contract cancellation and damages therein and settling of losses in case of crop failure due to weather or pest etc,

IBT: One of the key criticisms against the Essential Commodities (Amendment) Bill, 2020 is that the stock limits for “extraordinary circumstances” are dependent on the agmarketnet prices and the conditions of 100% increase in retail prices for perishables and 50% increase for non-perishables are likely to be breached frequently. How can this be prevented to ensure that frequent stock limits are not imposed?

Vijay Laxmi Pandey: There is much variation in the produce prices depending on the location, and this wide range of allowed price increase may lead to frequent enforcing of stock limits. Therefore, the stock limit imposition in case of price inflation should be linked to the prevailing local prices either at the block level or the district level

IBT: Private sector will be allowed to keep stock up to installed processing capacity, but the same limit will not apply for exports. Is this provision subject to misuse, and how can it be addressed?

Vijay Laxmi Pandey: The exporters can have stocks equivalent to their export orders. The stockists and speculators can misuse this provision as it will be challenging to ensure the exporters’ indents. For addressing this issue, it is required to register exporters with verifiable export orders. As the trade area will be unregulated, many traders just having PAN will become eligible for the trading. There will be no information on who has purchased from whom, at what price and how much.

It might lead to problems in stock accounting with processors, exporters, stockists, or even speculators. Therefore, there is a need to regulate the traders’ registration, and the transaction modalities. Warehouse Development and Regulatory Authority should be made mandatory, as suggested by others, so that privately-held stocks in warehouses are known to the government.

IBT: What should the central and state governments do further to ensure that farmers, particularly small farmers, can benefit from the enhanced market opportunities and freedom of food stocking?

Vijay Laxmi Pandey: The central and state governments need to create a better infrastructure of road and irrigation as well as market intelligence. Access to timely and adequate credit at a reasonable rate and better coverage of production risk through crop insurance are fundamental for ensuring benefits to small and marginal farmers.

Payment to farmers in the trade areas should be made the same day to avoid the defaults in light of interstate trade. The dispute settlement mechanism should be made easier and faster, as it is not feasible for poor farmers to apply to SDM and the latter may not have time to constitute a reconciliation board quickly.

For the farmers’ benefit, it is required that APMC mandis remain in good health to give fair competition to traders. The state and the central governments should support better infrastructure in mandi areas for unloading and loading, storage, grading and weighing of the produce, and other facilities for the farmers.

Prof. Vijay Laxmi Pandey is a Professor at Indira Gandhi Institute of Development Research. Some of the publications to her credit include “Rural urban disparities in Maharashtra”, “Zero tillage impacts in India’s rice-wheat systems: A review”, “Biofuels, pollution and health linkages: A survey from rural Tamil Nadu”, and “Assessing the impact of natural resource management research: The case of zero till technology in India”.


  1. Relating to actual fact at the ground .It is to be very thoughtful based on realities assessment.

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