The proposed amendments to the Maharashtra APMC Act are simply wrong. They propose to introduce a structural flaw that will hurt us for many decades and worse, fixing the problems will become politically untenable.
Once a minimum support price is announced for any product for farmers, there is no way to remove it. It will become a political hot potato and a farmers’ rights issue that no government can survive.
This one proposes an MSP that’s applicable to traders as well, which means that traders will face jail time if they purchase the product from farmers at below the MSP.
This is not the way markets work.
Traders can’t be forced to buy products. All that will happen is that traders will buy the highest quality produce at MSP and the government will end up buying the low quality stuff at MSP.
We are entering and are already in an era of abundance in agricultural produce. This is not an era of scarcity. So we can expect this scenario of government buying the low quality stuff for most products in most years.
This may not happen in an occasional drought year or a crop failure year, when the MSP is meaningless anyway as prices will be much higher than MSP.
And what happens to all the low quality stuff the government buys? It rots in godowns or the government will be forced to sell at a loss, depressing market prices even further.
This is bad politics and bad economics.
Here Is A Link To The Article That Inspired This Post: