As mustard prices soar above MSP, private players procure every kilo brought to mandis.

The Haryana government has not procured even a single quintal of mustard with private players buying out the entire oilseed produce of around 2 lakh tonnes that was brought to the state's mandis by the farmers. The state government welcomed the phenomenon saying that the private players procured the oilseed at rates much above the minimum support price.

After visiting eight mandis of Gurgaon, Rewari, Mahendragarh, Dadri and Bhiwani, state Agriculture and Farmers Welfare Minister JP Dalal told The Indian Express: "The MSP of mustard is Rs 4,650 per quintal while it is being sold up to Rs 5,800 per quintal in Rewari. In other mandis too, it's price is above 5,500 per quintal."

"The government has not purchased even a single quintal of mustard in Haryana mandis till date. We are happy with this situation when the private players buy produce from farmers above the prices of MSP. The welfare of farmers is the utmost priority of the government. If we need the agricultural produce, then we can procure it from the market," said Dalal.

Mustard is mainly produced in southern Haryana apart from some areas of Hisar and Fatehabad.

High global prices have made edible oil imports dearer, benefiting domestic mustard growers just when their crop is being harvested and brought to the mandis. Haryana Agriculture and Farmers Welfare Department Director General Hardeep Singh said, "Mustard is used in soaps, cosmetics, personal care products and cattle feed too. We aim to increase the area under the crop also but traditionally it is restricted to southern Haryana, and Hisar."

Commenting on the higher market prices of mustard, agriculture and food expert Devinder Sharma said, "It gives more reasons to make MSP a legal right for farmers. If markets are willing to pay a higher price, there is no reason why a floor price by way of an MSP should not be fixed. It does not mean the state has to buy the entire produce. It only raises the benchmark for trade."

A law to ensure MSP of agricultural crops is one among the main demands of farmers, who are currently sitting at the borders of Delhi as part of their ongoing agitation against three agri laws.

Dalal said the Haryana farmers are happy because of higher production of mustard this time. "This time, the production will be higher by 1-2 quintal per acre against the normal production of 8 quintal per acre."

The minister said kapas (narma cotton) is also fetching higher prices than the MSP in Haryana mandis currently. "The Haryana government is procuring 10 crops on MSP including millet, groundnut, sunflower, wheat, paddy and mustard and the farmers are getting payments directly into their accounts," he added.

A phenomenon occurred when Mustard prices were way above the minimum support price (MSP) as private players bought all produce of oilseed, brought by farmers to mandis of Haryana, India leading to less governmental intervention in the market. This occurrence enlightened more reasons for the government's intervention, by making MSP a legal right for farmers, as it increases their welfare, being the government's utmost priority. MSP's also known as price floors, are a form of intervention in the market, setting the price of goods above the equilibrium price, in order to protect and provide income for farmers and low-skilled workers.

The diagram above illustrates how the price floor of 4,650 Rupees (₹) per quintal is set above the equilibrium price. The equilibrium price Pe, is where supply and demand meet, where the price consumers pay, equals the number of goods supplied, Qe. In this case, assuming the equilibrium price is Pe per quintal, is the market of Mustard in Haryana with no external intervention. With government intervention of MSP ₹ 4,650 the expectation is that the private players will be buying the quantity supplied for a price of ₹ 4,650 per quintal, setting of a price floor.

In a normal situation of a price floor being set at ₹ 4,650, it would create excess supply from Qd to Qs, nonetheless, this excess supply was fully bought by private players. Generally, it would have been bought by the government and used for various purposes. However the Haryana government has not bought a single quintal of mustard, while the private players bought 2 lakh tonnes, that were brought to the state mandis by the farmers, at a higher price. In addition, the increase in the price paid by private players was caused by higher global prices. Furthermore, mustard is used in various products such as soaps and cosmetics, it can therefore be considered a complementary good, a non-price determinant of demand.

The diagram above illustrates the influence of governmental intervention by making a price floor fixed as a form of MSP. As shown, setting the price floor would create a new equilibrium at Pf and Q1, since the demand for Mustard Seeds is high and private players are willing to pay higher prices at around 5800 rupees, eliminating any excess supply. That being said, it is important to note this would only occur in the short run as consequences of the price floor include opportunities for higher produce, meaning an increase in the supply curve, consequently creating excess supply in the future.

In the long run, from the perspective of producers, this intervention would increase their welfare, and as stated in the article, increase the production "by 1-2 quintal per acre against the normal production of 8 quintal per acre". Also, it creates security, incentive, and stability for farmers, especially low-income ones, to continue production, which also has impacts on other stakeholders. An example would be workers, they would be likely to gain as employment increases as a result of greater production. The government would be better off as they, in the long run, would not have to buy the excess supply, which was previously created. However, intervention would not bring solemnly positive benefits. As for consumers, they would not be better off as they would be paying higher prices. Although there are negative and positive outcomes, the negative consequences could also bring benefits.

The occurrence reported shows the necessity farmers have for the intervention of the government. As it shows that the market is willing to pay a higher price, setting a legal fixed price floor would guarantee benefits for farmers and the government of India, as it "raises the benchmark for trade". Moreover, it is important to consider that farmers have been protesting against the three farm bills that have a chance to become laws. The bills seek to end the monopoly of the government regulated agricultural market; Provide a legal framework that will allow farmers to enter into contracts with companies and produce for them; allow agricultural businesses to stock food articles and remove the government's ability to impose restrictions aimlessly. These three farm bills raise both assurances and concerns for farmers, the main concern being that the implementation of these bills would end the MSP system.

To conclude, Haryana's Mustard produce phenomenon gave an incentive for the intervention of India's government in making MSP a legal right for farmers as this would increase their welfare, hence, increasing their produce. This increase would eventually result in an excess supply, bought by the government. From these expansions, new opportunities and consequences arise benefiting some and other stakeholders. Finally, the decision of whether this intervention is necessary is left for the best judgment of India's government, who seek, as their main priority, to protect and incentivize their farmers.