Parliamentary disclosures expose a widening gap between MSP procurement and farmers’ real costs
THE UNION GOVERNMENT’S own disclosure in Parliament has laid bare an uncomfortable truth. The average outstanding debt per agricultural household stands at ₹2.03 lakh in Punjab and ₹1.83 lakh in Haryana—among the highest in the country.
This admission, made by Union Minister of State for Agriculture Ram Nath Thakur in reply to a question in Parliament, forces a fundamental policy question: how can the two states that form the backbone of India’s food procurement system also be the most indebted?
Punjab and Haryana are not marginal contributors to India’s food economy. They are the principal suppliers of wheat and rice under the National Food Security Act (NFSA), feeding millions through the public distribution system.
Procurement at the Minimum Support Price (MSP) is not incidental here—it is systematic, large-scale, and sustained. And yet, indebtedness has deepened year after year. This contradiction demands deeper examination than the usual debates around a legal guarantee for MSP.
Empirical evidence from Punjab Agricultural University (PAU) is instructive. In its detailed study Indebtedness among Marginal and Small Farmers of Punjab, PAU found that over 80 per cent of marginal and small farmers were indebted, with average household debt exceeding ₹2 lakh.
Crucially, PAU notes that a significant portion of borrowing is used not only for cultivation but also for household survival—healthcare, housing, and social obligations—and that dependence on non-institutional credit remains high.
This brings us to the first structural issue: MSP assures a buyer, not a viable margin. Punjab’s farmers produce at scale, but rising input costs—seeds, fertilisers, labour, mechanisation, and irrigation—have steadily eroded net returns. MSP increases have rarely kept pace with the actual cost of cultivation. The result is predictable: high output, stable procurement, but fragile or nonexistent profitability.
Guaranteed procurement cannot compensate for guaranteed losses
Second, and more fundamentally, the Terms of Reference of the Commission for Agricultural Costs and Prices (CACP) deserve scrutiny. CACP is mandated not only to consider farmers’ costs but also to ensure price stability, adequate availability of food grains, and affordability for consumers.
In practice, this has meant that food procurement for the nation is systematically structured to keep food prices low, enabling governments to supply subsidised grain under the NFSA. The burden of this political and fiscal choice is disproportionately borne by farmers—especially those in Punjab and Haryana, who supply the bulk of this food.
This is not accidental. It represents a deliberate distortion of food pricing, where farmers are implicitly taxed so that the state can maintain cheap food buffers and subsidised distribution. The welfare of the consumer is protected; the welfare of the producer is compromised. That Punjab, the largest contributor to central grain stocks, also leads in farm indebtedness gives this argument undeniable empirical weight.
Farmer organisations, apprehensive after the Shanta Kumar Committee questioned the sustainability of open-ended procurement, have demanded a legal guarantee for MSP. That apprehension is understandable.
But Punjab’s experience suggests a more uncomfortable truth: even when MSP procurement continues uninterrupted, indebtedness persists. The crisis, therefore, lies not merely in the fear of MSP withdrawal, but in the deeper architecture of agricultural pricing, cost absorption, and credit dependence.
Assured MSP has secured food for the nation, but not financial security for farmers
Debt in Punjab is not primarily the result of extravagance or moral failure. It is the outcome of a system that prioritises national food security and price suppression while leaving farmers to absorb rising costs, climate risk, and social obligations with inadequate institutional support.
Unless policy confronts this imbalance—by revisiting CACP’s pricing philosophy, aligning MSP with real costs, improving cash-flow timing, reducing reliance on informal credit, and sharing the true cost of food security more equitably—Punjab and Haryana will continue to produce food for the nation while sinking deeper into debt.
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The minister’s reply and PAU’s findings are not isolated statistics. Together, they expose a structural injustice at the heart of India’s food economy—one that can no longer be glossed over with procurement figures alone.
So, assured or guaranteed MSP is not the solution; the solution lies in correct policy and pricing. 
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Gurpartap Singh Mann
With prior experience as a Member of the Punjab Public Service Commission, the author brings a nuanced perspective to issues of governance and social change.
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