Government ready to guarantee Pay Commission for Govt. Employees, but not MSP for Kisans
Farmers in the country are demanding a legal guarantee from the central government for the Minimum Support Price (MSP) for agricultural produce. Following the historic farmers’ movement in 2021, the government formed a committee to consider this demand. However, the committee’s report has not been released to date. Meanwhile, for the past 11 months, farmers have been protesting along the Punjab-Haryana borders, demanding the legal guarantee of MSP.
Veteran farmer leader Jagjit Singh Dallewal has been on a hunger strike for 53 days. Despite this, the central government has not only failed to fulfill the demand for a legal guarantee of MSP but has also not opened a dialogue with the protesting farmers. According to government data, the number of landholdings in the country exceeds 14 crores, and 88% of farmers own less than one hectare of land.
On the other hand, the central government has announced the formation of the 8th Pay Commission for its employees. The recommendations of the commission could be implemented starting January 2026. Although the exact salary increase for employees has not yet been decided, it is estimated that this decision will impose an additional financial burden of around ₹2 lakh crore on the government. The latest decision is expected to benefit approximately one crore central employees and pensioners.
These two points highlight the government’s priorities and contradictions. Regarding the legal guarantee of MSP, it is argued that the financial burden it would impose on the government would be difficult to bear. Liberal economists often present this argument. However, looking at the current structure of agricultural markets, it is not evident that the government needs to procure the entire quantity of agricultural produce grown in the country. Government intervention would only be required when prices fall below the MSP. Even in such cases, the government has opportunities to recover losses through storage and exports.
This can be easily understood by looking at states where bonuses over the MSP for paddy and wheat were promised during elections and fulfilled. Since the issue was politically significant, paddy was procured at ₹3,100 per quintal instead of the MSP of ₹2,300 per quintal in states like Chhattisgarh and Odisha. This demonstrates that providing better prices to farmers is feasible. The benefits of this extend not just to farmers but to the entire economy, making it an economically viable decision rather than a loss-making one.
The decision regarding the Eighth Pay Commission for central government employees can also be seen from an electoral perspective, as Delhi is gearing up for assembly elections, and a significant number of central government employees are voters here. What is surprising, however, is that central employees did not need to stage protests for this, nor was the financial burden on the government cited as an argument. Yet, when it comes to farmers’ demand for a guaranteed MSP, the financial burden is brought up as a reason for resistance.
Another argument against the legal guarantee of MSP is that it would lead to market intervention, going against the principles of a free market and competition. It is worth noting that the central government had introduced three new farm laws in an attempt to liberalize agricultural markets, which had to be repealed due to the farmers’ protest.
If we analyse it, the argument for free markets and healthy competition fails when it comes to agricultural products. For instance, India relies on imports for over 60% of its edible oil requirements. Domestic production accounts for only about 40% of the country’s consumption. Given this gap between demand and supply, oilseed farmers should ideally receive significantly better prices for their produce.
However, last year, the prices of two major oilseed crops, mustard and soybean, fell below the minimum support price (MSP) because the government encouraged cheap imports of edible oils. This is a precise example of government intervention in the market. The reality is that farmers are not allowed to benefit from the free market. Last year, restrictions were imposed on the export of non-basmati rice, wheat, and onions, along with several other prohibitions. In such a scenario, the concept of a free market becomes ineffective.
Farmers face risks on both production and pricing fronts. The climate crisis, adverse weather events, and crop diseases pose risks to production. At the same time, market price fluctuations deprive farmers of fair prices. This doubles the risk for farmers. In such circumstances, if farmers demand a guarantee of minimum support prices from the government, it cannot be considered unreasonable. Despite their hard work and numerous risks, farmers are often deprived of fair prices for their produce.
India has approximately 146 million farmers. Under the Pradhan Mantri Kisan Samman Nidhi scheme, the government provides financial assistance of ₹6,000 annually to around 90 million farmers. This means the government itself acknowledges that farmers need support. Therefore, it becomes even more important to guarantee fair prices for farmers’ crops. The losses farmers incur due to unfair pricing far exceed the ₹6,000 assistance provided annually.
There is considerable debate about whether implementing an MSP guarantee is practical. This guarantee can be better understood through the example of sugarcane. The Sugarcane Control Order has been in effect since 1966, under which no sugar mill can buy sugarcane from farmers at a price lower than the government-set rate. This system has been in place for the past 68 years. The question then arises: why can’t a similar system be applied to other crops?
The government must also address the fact that farming is no longer seen as an attractive occupation for many. The challenge is exacerbated by smaller landholdings. On the other hand, the number of people dependent on agriculture is not decreasing but increasing, as sufficient jobs are not being created in the manufacturing and service sectors.
According to the latest Labour Force Participation Survey data, more than 44% of the workforce is still employed in agriculture. In the current fiscal year, the growth rate of agriculture and allied sectors is expected to be 3.8%, compared to just 1.2% last year. With strong agricultural growth, GDP growth is estimated to reach 5.6%. In this context, it is the government’s responsibility to implement policies that establish agriculture as a financially rewarding profession.
The Terms of Trade Index for agriculture was at 87.82 in 2004-05, rising to 102.95 in 2010-11 (using 2011-12 as the base year). This meant that farmers earned more from selling their produce compared to what they spent on inputs. However, by 2022-23, the Terms of Trade Index dropped to 97.21, indicating that farmers’ income from selling produce had become less than their expenditure on inputs. To address this imbalance, an MSP guarantee needs to be considered as a viable option. Additionally, the government must open channels for dialogue with farmers and view the ongoing movement not merely as the demand of farmers from one or two states but as a legitimate need of farmers across the country.
It is evident that farmers nationwide have become highly aware of the MSP issue, and this matter cannot be shelved for an extended period.
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