Fixing MSPs of Wheat and Paddy

Paddy–wheat, as part of the kharif and rabi crop rotation stormed into the crop pattern of northern India, typically in Punjab and Haryana, with the onset of the green revolution in the late 1960s. Notwithstanding the all-out efforts of the governments to curtail its further expansion in order to minimise water use, load on electric power, air pollution caused by burning paddy straw, etc, the area under paddy crop cultivation went on increasing and has come to occupy about three-fourths of the total cultivated area of Punjab. Farmers are constrained that under the existing circumstances, alternative crop enterprises do not stand a chance of economic return and higher stability in yield and price as compared to paddy.

To fix the minimum support price (MSP) of a crop, various criteria are considered, such as ruling price (projecting the past trend in price), parity price (keeping crop price index at par with non-farm price index and input price index), and net international price (after accounting for tariff and non-tariff barriers). Yet, the most relevant criterion is the cost of cultivation of the crops for which every year, a broad-based exercise is carried out at the national level with a huge cost of data generation. A look at the cost structure of paddy and wheat cultivation in Punjab indicates that about one-third of the operational cost gets incurred on human labour. In light of COVID-19-induced lockdowns and the back-migration of labourers from Bihar and Uttar Pradesh, the current year’s crops are facing labour shortage, and thus, the magnification of the wage bill is certain. The load of some input subsidies—particularly on electricity, water, and other environmental costs borne by respective states—also does not get reflected in the MSP. The buffer stocks, global versus domestic prices and political scenario are the likely reasons for overruling the cost-based market structure.