Part 3 : Technicalities in and surrounding the bills.

 Part 3 : Technicalities in and surrounding the bills.

  1. How is MSP fixed? And how much MSP increased in the Modi government?

The Commission for Agricultural Costs and Prices (CCAP) determines how much MSP of a crop. The government decides the MSP only on the recommendation of CCAP.

If the bumper yield of a crop falls, its prices fall, then the MSP acts as a fixed assurance price for the farmers. In a way, it is like an insurance policy to protect farmers when prices fall.

Currently, 22 crops are being procured under MSP. These 22 crops include paddy, wheat, sorghum, millet, maize, moong, groundnut, soybean, sesame, and cotton. 


  1. Observations on and Determinants of MSP : 

  1. Only 6% of the total farmers benefit from MSP according to the Shanta Kumar Committee

  2. According to a NITI Aayog report, 100% farmers in Punjab benefit from MSP.

  3. Determinants of MSP : The key determinants of MSP are demand and supply, cost of production, price trends, both domestic and international, terms of trade between agriculture and non-agriculture sectors and a minimum of 50% as the margin over cost of production.

  4. However, costs of production vary widely from state to state. MSPs are calculated by a methodology based on all India weighted average costs. “This does not necessarily guarantee remunerative prices to all farmers in all regions,” states a 2018 paper by PK Mishra of the international food policy research institute and T Haque, former chairman of NITI Aayog’s land policy cell.

  5. No regional MSP

  • The ordeal of MSP is that only 22 crops are included in the regime and only 6% farmers benefit from it, moreover The transaction agent essentially informs the farmers about the final price for his product which is more often than not, way below MSP.

  • Moreover, If one looks at the report of the Commission for Agricultural Costs and Prices, not only paddy, the cost of every crop varies from state to state within the country. Then, the question arises, when the costs are varied, how can the Minimum Support Price (MSP) be one?




And the new farm bills aim to remedy exactly that.

3) These days, we hear so much about this term ‘Adtiyas/Arhityas’, but what is it really? 


  1. The arhtiya isn’t a trader holding title to the grain bought from a farmer. He merely facilitates the transaction between a farmer and actual buyer, who may be a private trader, a processor, an exporter, or a government agency like the Food Corporation of India (FCI). That makes him more akin to a broker.


  1. The chain goes like this: Farmers--APMC mandi--Commission agent(Arhitya)---Traders---Transaction Agent---Farmer.


  1. These traders further sell the product to retailers, grocers, wholesalers, etc at exorbitant and inflated prices

  • For eg, one kg of wheat would cost 50-60 rupees to an average consumer, the farmer would get only 7-10 Rupees as remuneration, thanks to middlemen.

  • Comparison of Punjab and Andhra Pradesh:  AP’s commission agents charge only 2%. Moreover, unlike in Punjab and Haryana, they collect it from the farmer, not the buyer. But the levy of commission on percentage basis also induces them to secure the best possible price for the farmer

  • In Punjab there is no such incentive: Since the MSP is fixed, he only aims at maximising the quantity of sales routed through him.



  1. However, Adityas aren’t the only problem: These Cartels of Traders often have a mutual understanding of not buying the perishable produce even at MSP and thus the farmer is obliged to sell at meagre prices or even obliged to throw the perishable produce away.





  1. Adtiyas as : Non-institutional sources of loans

  • As many as 86 per cent of the farmer and 80 per cent of agricultural labour households are mired in debt, says a study on Indebtedness among Farmers and Agricultural Labourers in Rural Punjab.

  • There was a high powered committee which was set up by the Central government. The committee had said that if we want farmers to come out of the clutch of insurers then institutional credit must be encouraged.

4)Why the term Privatisation?

  1. Another term that is being thrown around in these protests is “Privatisation”. Contract farming is looked upon as privatization of farming, a major concern here is that farmers will never be able to negotiate with the corporate sector. 

  2. The act does not prescribe or specify that the contract price of the crop should be at least equivalent or above the MSP. It means the contractor/companies could pay whatever price they want to the farmer.

Being big private companies, exporters, wholesalers, and processors, they will always have an edge in disputes. A written contract is not mandatory which means farmers will never be able to prove a violation of terms of the contract. Farmers have a valid point because they have seen privatization in markets of seeds and fertilizers where the government believed prices will go down because of competition but the results are opposite, and farmers fear the same in this case also.

Limits of hoarding have been removed because the situation of ‘Extraordinary price rise’ is way too high to reach which simply means big private players can any time cause artificial price fluctuation. Not only farmers will be affected by it, but consumers will also be affected because the main goal or focus of a private company will be to raise its profits.

(Part 4 in the next post)

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