Maarg Manthan · Topic 11.10

Agricultural Labour and Price Policy

Geography › Agriculture and Crop Geography · Topic 11.10

Agricultural labour consists of cultivators who farm their own land and agricultural labourers who work for wages on others' land. In Census 2011 there were about 119 million cultivators and 144 million agricultural labourers, so labourers outnumbered cultivators for the first time. Their wages are low and work is seasonal. Price policy is led by the minimum support price (MSP), announced by the government on the advice of the Commission for Agricultural Costs and Prices for 22 crops, with a fair and remunerative price for sugarcane, together with procurement and the public distribution system.

5 min read · UPSC Prelims · Geography · Agriculture and Crop Geography

At a Glance

Cultivators (2011) About 119 million
Agricultural labourers (2011) About 144 million
MSP crops 22, plus FRP for sugarcane
Adviser body CACP (since 1965 as APC)
Procurement FCI; mainly wheat and rice
Exam link UPSC Prelims, Geography: Agriculture and Crop Geography

Where Does It Fit?

This topic follows the revolutions in farming and looks at the people who work on the land and the prices they get. It sets up the topic on government schemes and the National Policy for Farmers that closes the policy part of the macro. Previous topic: Horticulture, honey Exam…">Agricultural Revolutions (Green Revolution, White Revolution, Blue Revolution, etc.). Next topic: Major Government Agricultural Schemes and the National Policy for Farmers.

Who Are the Agricultural Labourers and What Are Their Problems?

Numbers: Census 2011 counted about 118.7 million cultivators and 144.3 million agricultural labourers, and the share of labourers has grown. Most are landless or marginal farmers, and many belong to Scheduled Castes and Scheduled Tribes.
Features: seasonal work, with long periods of unemployment in the lean months, low wages that are below the minimum wage in many states, little bargaining power, and no social security.
Gender: women are a large share of the workforce but are paid less than men and rarely own land. As men move out of farming, the ‘feminisation of agriculture’ is rising.
Migration: labour moves seasonally from poorer eastern states to Punjab, Haryana and western Uttar Pradesh for transplanting and harvest, as in Migration: Push and Pull Factors, Internal and Cross-Border Migration.
Policies: the Minimum Wages Act, 1948; the Bonded Labour (Abolition) Act, 1976; MGNREGS (2005) guaranteeing 100 days of work; and the e-Shram database of unorganised workers.

How Does the Government Fix and Support Prices?

Element	Content
Minimum support price	The price at which the government is ready to buy the crop. Announced for 22 mandated crops: 14 kharif crops, 6 rabi crops and 2 commercial crops (copra and raw jute), before sowing. Sugarcane has a separate fair and remunerative price (FRP)
Commission for Agricultural Costs and Prices	Set up in 1965 as the Agricultural Prices Commission and renamed in 1985; recommends MSP based on cost of production, demand and supply, market prices, effect on consumers and other factors
Cost formula	Costs are A2 (paid-out costs), A2+FL (with the imputed value of family labour) and C2 (comprehensive, including rent and interest on owned assets). Since the budget of 2018-19, the MSP is set at least at 1.5 times the A2+FL cost. The Swaminathan Commission had recommended C2 plus 50 per cent
Procurement	The Food Corporation of India and state agencies buy wheat and rice mostly in Punjab, Haryana, Madhya Pradesh, Chhattisgarh and Telangana, and the grain is used for the public distribution system and buffer stocks under the National Food Security Act, 2013
Other schemes	Price Support Scheme for pulses and oilseeds, PM-AASHA (2018) with price deficiency payment, Market Intervention Scheme for perishables

What Are the Issues and Reforms?

Uneven reach: MSP is effective mainly for wheat and rice in a few states, so farmers elsewhere and growers of other crops often sell below it. The demand for a legal guarantee of MSP has been a matter of protest.
Distortions: assured purchase of wheat and rice has encouraged water-intensive crops in Punjab and Haryana, causing falling groundwater, as in Water Resources: Utilization, Water Contamination, Conservation Methods.
Fiscal cost: procurement, storage and the subsidy are costly, and stocks sometimes exceed buffer norms.
Markets: the Agricultural Produce Market Committee (APMC) system, the electronic National Agriculture Market (e-NAM, 2016), and the three farm laws of 2020, which were repealed in 2021 after protests.
Alternatives: price deficiency payments as in Madhya Pradesh’s Bhavantar scheme, direct income support, crop diversification incentives and better storage.

As an analytical point, price policy has to balance three goals: fair incomes for farmers, affordable food for consumers and a manageable burden on the budget. The schemes for farmers are in Major Government Agricultural Schemes and the National Policy for Farmers, and the cropping seasons for which MSP is announced in Cropping Seasons in India.

Why Is This Topic Important?

Prices MSP rules are asked
Labour Census numbers
Debate Legal guarantee

What Came Next?

The next topic describes major agricultural schemes and the National Policy for Farmers. Next topic: Major Government Agricultural Schemes and the National Policy for Farmers.

Key People and Terms

MSP Minimum support price
CACP Commission for Agricultural Costs and Prices
FRP Fair and remunerative price for sugarcane
A2+FL Paid-out cost plus family labour
C2 Comprehensive cost
e-NAM Electronic National Agriculture Market

Exam Corner

Points to Remember

MSP is announced for 22 crops.
MSP = at least 1.5 times A2+FL (from 2018-19).
CACP advises on MSP.
In 2011, agricultural labourers outnumbered cultivators.
Farm laws were repealed in 2021.

Do Not Confuse With

Cultivator and agricultural labourer Works own land versus works for wages
MSP and FRP General crops versus sugarcane
A2+FL and C2 Narrow versus comprehensive cost

Memory Hook

Twenty-two crops get a floor; CACP advises, FCI buys, and wheat and rice take the door.

Mains Angle

Questions ask for an assessment of the MSP system and the demand for its legal guarantee. These points add depth.

Labour Landless and seasonal
MSP Reach and distortions
Reform Markets and income support

A Question You May Face

An original practice question, not a past paper question.

“Examine the problems of agricultural labour in India and critically evaluate the minimum support price system.”

How to Answer

Labour Numbers and problems.
MSP How set, who buys.
Problems Reach and water.
Reform Alternatives.

GS Relevance

Prelims: MSP crops, CACP, procurement, labour data. GS Paper 3: farm pricing, food security and subsidies.

Frequently Asked Questions

What is the minimum support price?

The minimum support price is the price at which the government is ready to buy a crop from farmers, announced before sowing for 22 mandated crops on the recommendation of the Commission for Agricultural Costs and Prices. It is meant to protect farmers from sharp falls in prices. Since 2018-19 it is set at least at 1.5 times the cost.

What is the Commission for Agricultural Costs and Prices?

The Commission for Agricultural Costs and Prices is an expert body that recommends minimum support prices to the Government of India. It was set up in 1965 as the Agricultural Prices Commission and renamed in 1985. It considers cost of production, demand and supply, market price trends, and the effects on consumers.

Who are agricultural labourers?

Agricultural labourers are persons who work on another person's land for wages in cash or kind, and who have no right of lease or contract on the land. Census 2011 counted about 144 million of them, more than the 119 million cultivators. They are mostly landless, poorly paid and affected by seasonal unemployment.

How does the government procure foodgrains?

The Food Corporation of India and state agencies buy wheat and rice from farmers at the minimum support price, mostly in Punjab, Haryana, Madhya Pradesh, Chhattisgarh and Telangana. The grain is stored as buffer stock and distributed through the public distribution system under the National Food Security Act.

What are the criticisms of the MSP system?

MSP mostly benefits wheat and rice farmers in a few states, since procurement is limited elsewhere. It encourages water-intensive crops, lowers diversification, raises the fiscal burden of procurement and storage, and does not reach landless labourers and tenants. There is also a demand to give it a legal guarantee.

PYQ Practice — Statement Analysis

1 MSP is announced for 22 crops.

True

Sugarcane has a separate FRP.

2 The CACP was set up in 1965.

True

As the Agricultural Prices Commission.

3 The number of cultivators exceeded agricultural labourers in Census 2011.

False

Labourers outnumbered cultivators.

4 MSP is fixed by the Reserve Bank of India.