Words Vikas Parasram Meshram
NEW DELHI (India CSR): Economists and government lawyers, who secure funding from international institutions and corporate lenders, deliberately spread confusion by claiming that a Minimum Support Price (MSP) guarantee law is financially disastrous and unfeasible. They argue that the government would need to spend over Rs 17 lakh crore annually because it would be legally bound to purchase the entire production of 24 MSP crops.
Misleading Claims About MSP Guarantee Law
Economists and government lawyers, who secure funding from international institutions and corporate lenders, deliberately spread confusion by claiming that a Minimum Support Price (MSP) guarantee law is financially disastrous and unfeasible. They argue that the government would need to spend over Rs 17 lakh crore annually because it would be legally bound to purchase the entire production of 24 MSP crops.
Purpose of MSP Guarantee Law
However, these anti-farmer policymakers must understand that the purpose of the MSP guarantee law is not to compel the government to purchase all agricultural produce but to prevent crops from being sold in the market below MSP.
Benefits of Ensuring MSP
Ensuring MSP for all crops would increase farm incomes, boost consumer demand, and encourage crop diversification. It would act as a safety net to ensure sustainable food security and protect farmers from exploitation by middlemen and moneylenders.
Existing Cotton Procurement Model
Based on the practical model of cotton procurement in the country, the government only purchases cotton when market prices fall below the MSP. This procurement accounts for less than 1% of the total annual agricultural production. According to CRISIL Market Intelligence & Analytics, in the 2023 agricultural marketing year, the actual cost of such a guarantee was approximately Rs 21,000 crore.
Projected Costs of MSP Implementation
By 2025, with the announced MSPs, this cost would be less than Rs 30,000 crore, requiring a working capital of around Rs 6 lakh crore. However, the actual expense for the government would be the difference between the MSP and mandi prices, which in the financial year 2023 amounted to just Rs 21,000 crore.
India’s Agricultural Stock Situation
It is important to note that apart from rice, there is no surplus stock of any other crop in the country. In 2023-24, India imported oilseeds worth approximately Rs 1.31 lakh crore and 6.64 million metric tons of pulses. Despite claims of record wheat production and an export ban, the government could procure only 26.2 and 26.6 million metric tons of wheat in 2023 and 2024, respectively, against the target of 37 million metric tons.
Harmful Effects of Public Distribution System Procurement
Contrary to popular belief and government claims, food grain procurement for the public distribution system harms farmers. By purchasing at MSPs declared on the A2+FL cost instead of the C2 total cost, the government causes Indian farmers an annual economic loss of over Rs 72,000 crore.
Open Market Sale Scheme (OMSS) and Its Impact on Farmers
Just before the arrival of wheat and other crops in the market, the government, under the so-called Open Market Sale Scheme (OMSS) to control inflation, releases millions of metric tons of wheat and paddy to traders and industries at prices lower than the cost and market value, creating an artificial market glut that leads to massive financial losses for farmers.
Intentional Dumping and Its Consequences
In international trade, this is called intentional dumping. In India, year after year, dumping grains at prices lower than procurement and market rates is an unjust price-bias government strategy, which is an open conspiracy against farmers. This jeopardizes the viability of Indian agricultural producers.
Government’s Role in Depressing Market Prices
According to a press release issued by the Government of India’s Press Information Bureau on February 11, 2025, under the OMSS, the government allocated 1.2 million metric tons of rice to state governments and public corporations, and 2.4 million metric tons of rice to ethanol distilleries at Rs 2,250 per quintal, reducing the price by Rs 550 per quintal.
Unfair Wheat Pricing Strategy
Similarly, the reserve price for wheat sales was set at Rs 2,325 per quintal, which was Rs 900 per quintal lower than the cost and market rate. Through these biased policies, the government artificially depresses market prices, causing significant financial losses to farmers.
Massive Economic Loss to Indian Farmers
According to a study by the Indian Council for Research on International Relations and the Organization for Economic Cooperation and Development, biased government policies that artificially suppress agricultural prices resulted in a loss of Rs 14 lakh crore to Indian farmers in 2022. Between 2000 and 2017, at 2017 prices, Indian farmers suffered a cumulative loss of Rs 45 lakh crore. This is why Indian farmers remain poor, indebted, and driven to suicide.
Middlemen and Moneylenders’ Role in MSP Suppression
When domestic agricultural production is lower than demand, artificial shortages created by middlemen and moneylenders are responsible for the sale of crops below the MSP. According to a report published by the Economic and Policy Research Department of the Reserve Bank of India (RBI), farmers receive only 30% of the retail price of fruits and essential vegetables, while intermediaries pocket 70%.
Farmers’ Share in Consumer Prices
The RBI’s 2025 report states that farmers receive only 40-67% of the consumer sale price for rabi crops. The government has a responsibility to end this exploitation, which is possible only through the MSP guarantee law.
RBI’s Findings on Bad Loans and Agricultural Debt
In response to an RTI petition, the RBI revealed that, since April 1, 2014, Indian banks have written off bad loans worth Rs 16.61 lakh crore belonging to various companies. Meanwhile, outstanding agricultural loans in the country have exceeded Rs 32 lakh crore, burdening over 18.74 crore farmers.
Contrasting Treatment of Corporate and Agricultural Loans
In reality, the total outstanding agricultural loan is 20 times the amount allocated to the agricultural sector in the annual budget. In contrast, over the past 11 years, Indian companies have had Rs 16.61 lakh crore of bad loans written off, with only 16% recovered. Over the past five years alone, banks have written off corporate loans worth Rs 10.6 lakh crore without much scrutiny. Reports indicate that 50% of these non-performing loans belong to large corporations.
Corporate Loan Waivers vs. Farm Loan Waivers
In the fiscal year 2023-24 alone, banks waived Rs 1.7 lakh crore worth of corporate loans. A year earlier, in 2022-23, they wrote off Rs 2.08 lakh crore. However, when it comes to waiving farm loans, the central government has done so only twice – in 1990 and 2008. Some state governments have taken independent initiatives, but this does not burden banks as state governments compensate for the waived amounts.
Unequal Treatment of Loan Defaulters
While corporate loan defaults are generously written off as if they contribute to nation-building, small farmers and rural workers are held accountable for even minor repayment failures. Meanwhile, wealthy defaulters receive easy relief. Among them are over 16,000 willful defaulters who collectively owe banks Rs 3.45 lakh crore, an amount that the RBI itself admits they had the capacity to repay but chose not to.
Inadequate Agricultural Investment and ‘Operation Greens’
Although there is broad consensus that investing adequately in agricultural infrastructure can reduce farmers’ losses, the reality is that the ‘Operation Greens’ initiative has failed to stabilize vegetable prices completely. This failure may be due to insufficient financial support for the scheme.
Massive Corporate Debt Write-Offs vs. Agricultural Investments
In December 2023, the National Company Law Tribunal (NCLT) approved the bankruptcy resolution plan for Reliance Communications Infrastructure Ltd. (RCIL), which allowed the petitioner to escape liability for 99% of outstanding loans. Considering this, it is unjust that, in 2018-19, while only Rs 500 crore was allocated for ‘Operation Greens,’ RCIL was allowed to write off Rs 47,251.34 crore in debt and repay just Rs 455.92 crore.
Reallocating Debt Write-Offs to Agriculture
If this amount had been recovered and invested in ‘Operation Greens,’ there would be no shortage of financial resources to invest in infrastructure needed to stabilize fruit and vegetable prices.
About the Author
Vikas Parasram Meshram is a social worker and activities working towards the rights of tribal and marginalized communities.
(India CSR)
