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Mainstream, VOL LVIII No 49, New Delhi, November 21, 2020

Agriculture: Area Planning - A way-out to ensure the MSPs | Sher Singh Sangwan

Saturday 21 November 2020

by Sher Singh Sangwan

A review of the minimums support prices (MSPs) of agricultural commodities in India reveals that whenever their prices were subdued, the farmers were in distress (1). It happened around 1990, the year of 1st All India Agricultural Loan Waiver (ALW) and also around 2008, the year of 2nd ALW. Recently during 2014-15 to 2017-18 too, the increase in MSPs/market prices has slowed down compared to their increase during the period 2010-11 to 2014-15 (op cit). It again increased farmers’ sufferings across the country, raising the demand for third ALW and as many as twelve major states implemented ALWs or area-based assistance during 2015-17(2). This association between lower agricultural prices and loan waiver amply substantiates that price is a vital factor in farmers’ anguish. Perhaps in view of this, Central Government has increased the MSPs of 23 crops one and half times over the paid out expenditure (cost A2) and imputed value of family labour (FL) in 2018(3).

Implementation of MSPs

The MSPs are implemented though procurement of wheat, paddy and some course cereals by Food Corporation of India (FCI) whereas the oilseeds and pulses are procured at MSP by National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) under price support scheme (PSS). Some quantity of fruits, vegetables and species are also procured under market intervention scheme (MIS) by NAFED in some years when their prices crash in their production areas. Notwithstanding, the average procurement of the total production by FCI during 2014-15 to 2017-18 was just 28% of wheat, 36% of paddy and 1% of course cereals which was mainly in the States like Punjab, Haryana and Madhya Pradesh while Andhra Pradesh, Uttar Pradesh and Rajasthan have joined to some extent in recent years.

Under PSS, the peak purchases were during Kharif 2017 and Rabi 2018 wherein nine crops viz., Moong, Urad, Soyabean, groundnut, tur, gram, mustard seeds, sunflower and masoor were procured at their MSP in 12 States(4). Among the states, MP has the highest share of about 30% both in value and quantity followed by Rajasthan with 24%, Gujarat at 16%, Maharashtra with 10% and Karnataka at 9%. Odisha, WB, Tamil Nadu and UP have purchased less than 1 percent. The remaining 11 percent was procured in AP (5%), Telangana (3%) and Haryana (3%). Despite that the purchases under PSS were only 12.3 % of their total production as against the maximum 25 % as per PSS guidelines. However, the crop wise beneficiary farmers in a sample survey of 8 states was as high as 80 %( 31%) for tur, 70% for Urad (16%) & gram (39%), 61 % (36%) for soyabean, 57 % (11%) for groundnut and 54 % (18%) for moong during 2018-19 [op cit, 1]. The figures in brackets are from the 70th round of NSS survey in 2012-13(5) which are much less then our survey in 2018-19. Farmers’ awareness about MSP was varied from 10 to 40 % in 2012-13 for various crops which has increased to about 80 percent in 2018-19 due to higher and wide spread purchases under PSS (Op cit, Chapter 6). Therefore, the MSPs may be difficult to be by passed by the Central Government despite the new farm bills.

Is unlimited Purchase at MSP Sustainable?

Despite the recommendation of Shanta Kumar Committee (2015) to limit purchase by FCI as per need; all market arrivals of wheat and paddy are still purchased at their MSPs without any cap for an individual farmer. Their present stock with FCI is more than double of the required buffer stock of about 30 million tons. NAFED is selling the pulses & oilseeds below the MSPs after incurring cost of storage and deterioration in quality of some crops. Thus, it is incurring losses of about Rs1000 to1500 per quintal and even after that unable to dispose of its stock before the next harvesting season. It disables government capacity to procure in the next season. It was also revealed during interaction with owners of private flour mills in Haryana and dal-mills in Gulbarga/Karnataka that they have stopped stocking in recent years due to the huge known stocks with FCI and NAFED. They purchases from NAFED from time to time as per need below the MSPs without incurring any cost for working capital and storage. Thus they also benefits equally or more than farmers due to government procurement. Thus, the food subsidy under PDS, losses under PSS & MIS and support for other crops is increasing continuously.

Perhaps, one of the considerations behind the three agri-marketing reform bills may be to encourage the private processors and others to build up their own stock in relaxed conditions of storage limit and taxes at the time of purchase. Moreover in present scenario of excess production of wheat and rice and shortage of about 35 million tons of oilseeds per year; it may not sustainable to ensure increasing MSPs for all crops in long run. Export is also not possible as our MSPs are above the international prices. Therefore; there is urgent need to try other prevalent options world over to support the farmers.

Area planning is one another alternative mechanism adopted by countries like USA, Australia, UK, Canada, etc to regulate their agricultural production as per their domestic and export requirements(10) and . To illustrate in UK, all farms above 5 hectare have to get approval for use of land not only for growing crops but even for other operations needed for agricultural allied activities. In USA and Australia, their Zoning process regulates the production of crops as per their domestic, industrial and export demand. Contrary to this type elaborate exercise, our Departments of Agriculture and Horticulture are generally setting targets of 10 % higher productions every year as a thumb rule.

I have read about this area planning approach during my Ph.D on Potato Production and marketing in India during 1983-86 and I got a support for this idea from a Rohtak- farmer while surveying in 2017. He was fed-up with distress sale of his poly-house products and said sir, my friend has a farm in Australia and all his products are sold at farm gate; but, he has to get approved his farm production plan before sowing. After this incident, I strengthened my confidence in this area planning approach and published this idea in the Tribune (7 & 8) and Indian Express (9) but it is yet to click with the planners.

How to Initiate Area Planning in India?

At National level, precise estimation of total demand of each agricultural commodity for domestic consumption both for human & animals and export has to be made well in advance of their sowing seasons by the related departments. Then that demand may be divided among the states in proportion of their acreage under the crop concerned in the last five years or so. The state may sub-divide the demand at regional/district level in view of their previous acreages. State officials of agriculture and horticulture departments may register individual farmer’s area under individual crops well before their sowing season for assuring purchases at MSPs. When aggregate registered area under a particular crop reaches the allocated limit of the district/state, its registration may be stopped and the remaining farmers may register for the next best paying crop where limit has not reached or they may sow any crop to market own their own. To benefit the maximum farmers a cap of area can be put an individual farmer, say 3 acres for potato, 10 acres for paddy/wheat, 5 acres of groundnut/mustard seed per farmer, etc to benefit all small and marginal farmers. More acreage may be allocated under a particular crop in the regions where its productivity is higher. The area planning may result in total production around the required level of individual crops. Regulated supply as per demand may reduce the gap between MSPs and market prices. It may, in turn, reduce the demand for government procurement at MSPs. Area planning may also optimize use of scarce resources water and fertilizers by avoiding the gluts in production individual commodities. When supply is regulated, the marketing reforms may boost private procurement at prices higher than MSP.


1. Government of India (2019): Impact Evaluation of Price Support Scheme, Department of Agriculture Cooperation and Farmers Welfare, Ministry of Agriculture and Farmers Welfare, March
2. Sangwan S.S. (2019): Does direct Income Support overweigh Agricultural Loan Waivers? Mainstream, VOL LVII No 18, New Delhi April 20
3. Government of India (2018): Boost to farmers’ income: Cabinet approves hike in MSP for Kharif Crops for 2018-19 Season, Accessed from
4. Government of India (2019): Procurement of Pulses & Oilseeds under PSS and PSF by NAFED, FCI & SFAC in last 10 years.
5. ---------(2014):Key Indicators of Situation of Agricultural Households in India, NSS 70th Round, , page.31,December
6. ----------(2015): Report of High Level Committee on Reorienting the Role and Restructuring the Food corporation of India with Shanta Kumar as Chairman, January
7. Sangwan S.S. (2019): Ssynchronizing Support : Area planning to control production based on need and farmer participation could go a long way in ensuring adequate MSP, The Tribune , Chandigarh, 10 June p. 12
8. ---------(2017): Area Planning : An alternative to MSP, The Tribune, Chandigarh, 10 October
9. ---------(2019): An alternative ‘Area Planning’ Price support scheme for Farmers, Indian Express, Delhi, 17 January
10. USA Department of agriculture and

(Dr. Sher Singh Sangwan is Former Professor SBI Chair, Chandigarh)

November 16, 2020

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