Introduction:

The future of Indian agriculture is at a crossroads. With the shrinking of the agricultural workforce and the diversion of fertile farmlands for urbanization, ensuring the sustainability of farming is a strategic imperative. Among the various support mechanisms for farmers, the Minimum Support Price (MSP) remains a central point of debate. Should there be a legal guarantee for MSP? This question has gained prominence, especially with the rising challenges in agriculture, from unpredictable climate patterns to volatile market prices.

The Decline of Agriculture and Its Impact

India’s agricultural sector faces a dual crisis: loss of both land and human resources. Prime agricultural lands across river basins, such as the Ganga-Yamuna Doab or the Krishna-Godavari delta, are being repurposed for real estate, infrastructure, and industrial projects. Additionally, the number of "serious farmers" – those deriving at least half of their income from agriculture – is dwindling. The number of operational holdings may be 146.5 million, but only a small fraction of these farmers remains committed to agriculture.

This decline threatens the future of India’s food security, as the country will need to feed a population of 1.7 billion by the 2060s. To sustain farming and ensure long-term food security, we must secure farmers' livelihoods. Price security, particularly through MSP, plays a crucial role in this context.

The Role of MSP in Securing Farmers

MSP is the government-mandated price at which it guarantees the purchase of crops if market prices fall below a certain threshold. It provides a safety net for farmers against price volatility. The process of fixing MSP involves recommendations by the Commission for Agricultural Costs and Prices (CACP), which takes into account factors such as the cost of production and market trends. Once approved by the Cabinet Committee on Economic Affairs (CCEA), MSP is set for various crops, including rice, wheat, and sugarcane.

For farmers to stay in business, there must be a balance between production costs and returns. Farming is a risky business – yield losses can occur due to weather anomalies, pest attacks, or other natural factors. However, price risks can be mitigated with a guaranteed MSP. This would encourage farmers to invest in their land and adopt modern farming technologies, which would boost productivity and reduce costs.

Arguments for and Against Legal MSP Guarantee

Supporters of a legal MSP guarantee argue that it would provide financial security to farmers, protecting them from unpredictable market conditions. It would also promote crop diversification, encourage farmers to shift from water-intensive crops to those less dependent on irrigation, and inject resources into rural economies, thus addressing distress in rural areas.

However, critics highlight several challenges with a legal guarantee for MSP. The most significant concern is the fiscal burden it would impose on the government, potentially reaching Rs. 5 trillion. Furthermore, such a system could distort market dynamics, discouraging private traders and leading to a situation where the government becomes the primary buyer of agricultural produce. This could be economically unsustainable, especially for crops with low yields. Additionally, legal MSP guarantees could violate World Trade Organization (WTO) subsidy principles, adversely impacting India’s agricultural exports.

The Way Forward: A Balanced Approach

Given the challenges associated with a legal MSP guarantee, alternative measures should be explored. Price Deficiency Payment (PDP) schemes, such as those implemented in Madhya Pradesh and Haryana, could be expanded at the national level. These schemes compensate farmers for the difference between market prices and MSP, ensuring price security without the fiscal burden of procurement.

Additionally, the government can focus on improving agricultural infrastructure, such as cold storage facilities, to help farmers better access markets and increase price realization. Supporting Farmer Producer Organizations (FPOs) could also help farmers by enhancing collective bargaining power and ensuring better prices for their produce. Moreover, gradual expansion of MSP coverage to include a wider range of crops would encourage diversification, reducing the dominance of rice and wheat.

In News:

The Indian government has decided to extend the special subsidy on Di-Ammonium Phosphate (DAP) fertilizer for another year, a decision aimed at stabilizing farmgate prices and addressing the challenges posed by the depreciation of the Indian rupee.

Key Government Decision

• Extension of Subsidy: The Centre has extended the Rs 3,500 per tonne special subsidy on DAP from January 1, 2025 to December 31, 2025.
• Objective: This extension aims to contain farmgate price surges of DAP, India’s second most-consumed fertilizer, which is being impacted by the fall in the rupee's value against the US dollar.

Fertilizer Price Dynamics and Impact

• MRP Caps on Fertilizers: Despite the decontrol of non-urea fertilizers, the government has frozen the maximum retail price (MRP) for these products.
  • Current MRPs:
    • DAP: Rs 1,350 per 50-kg bag
    • Complex fertilizers: Rs 1,300 to Rs 1,600 per 50-kg bag depending on composition.
• Subsidy on DAP: The subsidy includes Rs 21,911 per tonne on DAP, plus the Rs 3,500 one-time special package.
• Impact of Currency Depreciation:
  • The rupee's depreciation has made imported fertilizers significantly more expensive.
    • The landed price of DAP has increased from Rs 52,960 per tonne to Rs 54,160 due to the rupee falling from Rs 83.8 to Rs 85.7 against the dollar.
    • Including additional costs (customs, port handling, insurance, etc.), the total cost of imported DAP is now Rs 65,000 per tonne, making imports unviable without further subsidy or MRP adjustments.

Industry Concerns and Viability Issues

• Import Viability:
  • Fertilizer companies face significant cost pressures due to rising import prices and the current MRP caps.
  • Without an increase in government subsidies or approval to revise MRPs upwards, imports will be unviable.
  • Even with the extended subsidy, companies estimate a Rs 1,500 per tonne shortfall due to currency depreciation.
• Stock Levels and Supply Challenges:
  • Current stock levels for DAP (9.2 lakh tonnes) and complex fertilizers (23.7 lakh tonnes) are below last year's levels.
  • With inadequate imports, there are concerns about fertilizer supply for the upcoming kharif season (June-July 2025).

Government’s Strategy and Fiscal Implications

• Compensation for Imports:
  • In September 2024, the government approved compensation for DAP imports above a benchmark price of $559.71 per tonne, based on an exchange rate of Rs 83.23 to the dollar.
  • With the rupee falling below Rs 85.7, these previous compensation calculations have become outdated.
• Fiscal Impact:
  • The extended subsidy will cost the government an additional Rs 6,475 crore. Despite this, political implications of raising the MRP are minimal, as only non-major agricultural states are facing elections in 2025.

Future Outlook and Priorities

• Immediate Priority: The government’s primary concern is securing adequate fertilizer stocks for the kharif season, focusing on ensuring sufficient imports of both finished fertilizers and raw materials.
• Balancing Factors: The government will need to navigate the complex balance of maintaining fertilizer affordability for farmers, ensuring the viability of fertilizer companies, and managing fiscal constraints.

As the subsidy extension is implemented, all eyes will be on the government's ability to ensure a stable supply of fertilizers while safeguarding both farmer interests and economic sustainability in the face of an increasingly challenging exchange rate environment.

In News:

The Union Cabinet recently approved the launch of the National Mission on Natural Farming (NMNF), marking a significant shift in the government's approach to agriculture. This initiative, a standalone Centrally Sponsored Scheme under the Ministry of Agriculture & Farmers' Welfare, aims to promote natural farming across India, focusing on reducing dependence on chemical fertilizers and promoting environmentally sustainable practices.

What is Natural Farming?

Natural farming, as defined by the Ministry of Agriculture, is a chemical-free agricultural method that relies on inputs derived from livestock and plant resources. The goal is to encourage farmers to adopt practices that rejuvenate soil health, improve water use efficiency, and enhance biodiversity, while reducing the harmful effects of fertilizers and pesticides on human health and the environment. The NMNF will initially target regions with high fertilizer consumption, focusing on areas where the need for sustainable farming practices is most urgent.

Evolution of Natural Farming Initiatives

The NMNF is not an entirely new concept but a scaled-up version of the Bhartiya Prakritik Krishi Paddhti (BPKP) introduced during the NDA government's second term (2019-24). The BPKP was part of the larger Paramparagat Krishi Vikas Yojna (PKVY) umbrella scheme, and natural farming was also promoted along the Ganga River under the NamamiGange initiative in 2022-23. With the renewed focus on natural farming following the 2024 elections, the government aims to extend the lessons learned from BPKP into a comprehensive mission mode, setting a clear direction for sustainable agriculture.

In Budget speech for 2024-25, it was announced a plan to initiate one crore farmers into natural farming over the next two years. The mission will be implemented through scientific institutions and willing gram panchayats, with the establishment of 10,000 bio-input resource centers (BRCs) to ensure easy access to the necessary inputs for natural farming.

Key Objectives

The NMNF aims to bring about a paradigm shift in agricultural practices by:

• Expanding Coverage: The mission plans to bring an additional 7.5 lakh hectares of land under natural farming within the next two years. This will be achieved through the establishment of 15,000 clusters in gram panchayats, benefiting 1 crore farmers.
• Training and Awareness: The mission will establish around 2,000 model demonstration farms at Krishi Vigyan Kendras (KVKs), Agricultural Universities (AUs), and farmers' fields. These farms will serve as hubs for training farmers in natural farming techniques and input preparation, such as Jeevamrit and Beejamrit, using locally available resources.
• Incentivizing Local Inputs: The creation of 10,000 bio-input resource centers will provide farmers with easy access to bio-fertilizers and other natural farming inputs. The mission emphasizes the use of locally sourced inputs to reduce costs and improve the sustainability of farming practices.
• Farmer Empowerment: 30,000 Krishi Sakhis (community resource persons) will be deployed to assist in mobilizing and guiding farmers. These trained individuals will play a key role in generating awareness and providing on-ground support to the farmers practicing natural farming.
• Certifications and Branding: A major aspect of the mission is to establish scientific standards for natural farming produce, along with a national certification system. This will help in creating a market for organically grown produce and encourage more farmers to adopt sustainable practices.

Targeting High Fertilizer Consumption Areas

The Ministry of Agriculture has identified 228 districts in 16 states, including Uttar Pradesh, Punjab, Maharashtra, and West Bengal, where fertilizer consumption is above the national average. These districts will be prioritized for the NMNF rollout, as they have high fertilizer usage but low adoption of natural farming practices. By focusing on these areas, the mission seeks to reduce the over-dependence on chemical fertilizers and foster a transition to more sustainable farming practices.

Benefits of Natural Farming

The NMNF aims to deliver multiple benefits to farmers and the environment:

• Cost Reduction: Natural farming practices can significantly reduce input costs by decreasing the need for costly chemical fertilizers and pesticides.
• Soil Health and Fertility: By rejuvenating the soil through organic inputs, natural farming improves soil structure, fertility, and microbial activity, leading to long-term agricultural sustainability.
• Climate Resilience: Natural farming enhances resilience to climate-induced challenges such as drought, floods, and waterlogging.
• Healthier Produce: Reduced use of chemicals results in safer, healthier food, benefitting both farmers and consumers.
• Environmental Conservation: The promotion of biodiversity, water conservation, and carbon sequestration in soil leads to a healthier environment for future generations.

Conclusion

The launch of the National Mission on Natural Farming represents a critical step toward transforming India's agricultural practices into a more sustainable and environmentally friendly model. By targeting regions with high fertilizer usage, providing farmers with the tools and knowledge for natural farming, and creating a system for certification and branding, the government hopes to make natural farming a mainstream practice. As India continues to grapple with the challenges of climate change, soil degradation, and health risks from chemical inputs, the NMNF provides a promising framework for sustainable agriculture that benefits farmers, consumers, and the environment alike.

In News:

India’s agricultural sector, which employs 42.3% of the population, is crucial to the nation’s economy. However, it faces a range of challenges that need to be addressed to ensure long-term stability, food security, and sustainable growth.

Current Performance of India’s Agricultural Sector

• Key Agricultural Metrics and Growth
  • Foodgrain Production: India produced 330.5 million metric tonnes (MT) of foodgrains in 2022-23, maintaining its position as the world’s second-largest producer.
  • Horticulture Production: A record high of 351.92 million tonnes in horticultural production was achieved, marking a 1.37% increase from the previous year.
• Market Outlook
  • India’s agricultural market is projected to reach USD 24 billion by 2025.
  • The food and grocery retail sector is ranked as the sixth-largest globally, with 70% of its sales generated from retail.
• Investment and Export Trends
  • FDI in Agriculture: From April 2000 to March 2024, the agricultural services sector attracted USD 3.08 billion in foreign direct investment, while the food processing industry garnered USD 12.58 billion.
  • Agricultural Exports: India’s agricultural and processed food exports reached USD 4.34 billion in 2024-25, including products like marine products, rice, and spices.

Key Challenges Confronting India’s Agriculture

• Climate Change and Environmental Impact:Extreme weather events, such as heatwaves and erratic rainfall, continue to impact agricultural productivity. In 2023, India experienced its second-warmest year on record, contributing to crop damage and rising food prices.

• Water Stress and Irrigation Inefficiency: Agriculture consumes the majority of India’s water resources, but irrigation efficiency is still low. The country relies heavily on flood irrigation, which leads to significant water wastage. Only 11% of agricultural land is under micro-irrigation, far below global standards.
• Land Fragmentation and Declining Farm Sizes: The average size of agricultural farms has decreased from 1.08 hectares in 2016-17 to 0.74 hectares in 2021-22, hindering the adoption of modern farming practices and mechanization.
• Market Access and Price Realization: Farmers continue to face challenges in accessing fair market prices due to the dominance of intermediaries and inadequate market infrastructure. Despite reforms like e-NAM, price gaps between farm-gate and retail prices persist, leaving farmers with a smaller share of the final price.
• Technology Adoption and Digital Divide: Although agritech is growing in India, only 30% of farmers use digital tools in agriculture, and rural digital literacy is just 25%, which limits the widespread adoption of modern farming solutions.

Addressing Structural Issues in Indian Agriculture

• Soil Health and Sustainability:The excessive use of chemical fertilizers and mono-cropping practices has led to soil degradation. Approximately 30% of agricultural land in India is experiencing degradation, impacting productivity and sustainability. Stubble burning further exacerbates this issue, worsening air quality and soil health.
• Crop Diversification Challenges:Many farmers are locked into the wheat-rice cycle due to Minimum Support Price (MSP) guarantees, limiting the cultivation of other crops like pulses and oilseeds. Although India is the largest producer of pulses, the domestic production is insufficient to meet the growing demand.
• Feminisation of Agriculture:Women make up 63% of agricultural workers but own only 11-13% of the operational land, limiting their access to resources and decision-making power. This gender disparity hampers their economic security and limits their participation in agricultural development.

Conclusion

India’s agricultural sector holds immense potential but is facing significant structural challenges that must be addressed to ensure its long-term growth and sustainability. Urgent reforms are needed to address issues like climate vulnerability, inefficient irrigation, land fragmentation, and limited market access. Additionally, fostering technology adoption, improving infrastructure, and addressing gender disparities will be crucial for improving the sector's performance and securing India’s food security needs.