Dairy, MSP and FCI: Myths and realities

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Dairy, MSP and FCI: Myths and realities

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• Recent debate: The farm laws debate is focused on the relevance of the MSP regime, and whether the Food Corporation of India (FCI) is an inefficient subsidy-guzzling eating up valuable resources. The dairy sector is being shown as a role model, when comparing with agri.
• Agriculture versus dairying: The two sectors are totally distinct, and milk cannot be directly compared with foodgrains. Why not? Due to properties like perishability, bulkiness, cost and complexity of processing, marketing systems, and consumption patterns.

1. Milk is produced twice a day in wet period of milch animals, but cereals are seasonal
2. Milk spoils fast and needs better processing; cereals are non-perishable
3. In milk sector, most trade is unorganised but still many cooperatives and large companies exist
4. Cereals are covered under MSP but most are sold at village level and via arhtiyas (Only 5.8% of farmers benefit from MSP system - NSSO 70th round report)
5. Low income families first ensure availability of calorie-rich cereals, and only then milk
6. Consumption of value-added products from milk is much more than that from cereals

• Wrong use of Amul example: In states where cooperative sector is weak, to use the Amul example of Gujarat is being dishonest. Amul has made India a milk surplus nation and is a huge success, but other states may not be conducive to such progress.

1. A key reason is 'social exclusion' (casteism)
2. Another is 'elite capture' or unprofessional management
3. States like UP could not get cooperatives working well, adversely impacting farmers' livelihoods
4. Bihar also faces the same problem, making Indian dairy story a mixed bag 
5. Hence, do not use dairy sector's sucess to prove that MSP system is not a good one.

• MSP and FCI: The procurements by FCI ensure no distress sale by farmers, and nation's food security management. If India had entered 2020 with no buffer food stocks, or with privately owned food stocks, just imagine the situation. 
• Private buffer stocks: Imagine it indeed were so. Then when Covid struck, Indian govt. would have had three choices -

1. First - adopt a strong approach and force the private sector to sell grains at govt. prices (lower than market - due to fiscal pressures). Now, the govt. will be called anti-market, with no stable policy.
2. Second - go for importing grains and then distribution to the poor. This is a gamble, with no certainty of quantity and price, and a sure drain of foreign exchange.
3. Third - leave the poor to fend for themselves. This would've been immoral and an invitation to human catastrophe.
4. Hence, India's national food security system is a good one, not to be tampered with.

• Reforms: Both the MSP and FCI systems can be reformed in light of recommendations of the Shanta Kumar Committee. The unsustainable monocropping (due to MSP) needs to be contained now. Balance diversification is better.
• Scheme convergence: The government must ensure convergence in the multiple schemes being run, that are largely disjointed. Synergies are missing.
• Collectivisation: India is a very complex nation, and the multiple challenges being faced by farmers cannot be eliminated by a set of "new laws". Foster a spirit of collectivisation instead. 

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