From the forthcoming booklet by V. Venkataramaiah, President, AIKMS

“Increase of Farmers’ Income” —

Modi Govt.’s Great Deception

7. Minimum Support Price (MSP) – Modi’s acrobatics.

“National Commission on Farmers” headed by Swaminathan under the UPA-1 government in 2004 came to the conclusion that the main reason for the crisis in agriculture is due to farmers not getting remunerative prices. In the final report given in 2006, it made an important recommendation in this regard. “There should be an added 50% on C2 for comprehensive production of crops and Minimum support price should be decided at C2+50”. This was not implemented by Congress led Govt. then while in power, nor when it came back to power in 2009 under UPA-2. In the elections to the parliament in 2014, the BJP in its election manifesto promised that it will, as Swaminatham commission recommended, “decide a price that accrues a minimum 50% profit on production costs, will lend agri-inputs and loans at cheap rates. “In the election speeches Modi gave importance to it. After assuming power, there was no announcement of minimum support price with 50% profit. On 28.2.2016 in the meeting of agriculturists in Raibareilly in UP he declared that by the 75th independence day in 2022, he will double the income of farmers.

The Union Finance Minster Arun Jaitely, in the 2018 Budget presentation, declared that the 50% additional profit will come into effect with kharif crops 2017-‘18. This was in the background of the ensuring 2019 elections and of the pressure of the peasant movement. By then the Kharif season was four months old. Till then the government never made such a statement. Infact, the cost of production was calculated by excluding some expenses from (C2), Land rent, exempting interests on private capital and on investment on constructions in cultivable land. Instead of adding 50% of the production costs, Minimum support price (MSP) was declared on the basis of A2+FL+50% instead of C2+50%. Modi, instead of sticking to the promise made to the peasantry is deceiving with statistics and verbal jugglery. In fact the “Agricultural costs and Prices Commission” declared its assessment on production costs of crops in two ways, A2+FL and C2 separately. It is clearly defining the difference in the costs between the two to determine agri-production costs and recommend minimum support price. These are flawed.

The report submitted on 2.8.2015 by “Committee to examine Medhodogical Issues in fixing Minimum Support Prices”, by Dr. Ramesh Chand, member NITI Aayog pointed out some serious mistakes. In the report, it made 23 recommendations in all. For example, the value of labour power of the head of an agricultural family should not be equated with that of an agricultural labourer but with the wage of a skilled worker. Rent on land should be measured in tune with the actual market value rather than according to tenancy laws. When the farmer gets loan from private individuals for investing in agricultural production, interest payment should not be in accordance with bank rates but on the basis of interest payment made by the farmer. Interest on fixed capital, wear and tear of the machinery, inflation are all factors to be taken into account while calculating. Since foreign trade policies are adversely impacting the prices of crops, CACP should be involved and its recommendations should be taken into account. It is more than five years since Ramesh Chand committee report was submitted and not a single recommendation has been implemented by the Modi government.

The central government had directed that in order to decide the MSP, apart from production costs, some 12 aspects should constitute the basis. But these are not rational and not with factual perspective. The government policies towards agriculture, and peasantry are discriminatory and biased. They are anathema to the peasantry.

Central Agricultural Minister N.S. Tomar explained the factors which have been taken as the basis for deciding the MSP, while announcing the policy of MSP in the Lok Sabha on 20.9.2020. The factors which have been taken into consideration to announce the MSP to 22 crops are – “Cost of production, situation and outlook for supply and demand of various crops in domestic and world markets, price situation in domestic and international markets along with trade outlook, inter crop price parity, terms of trade between agriculture and non agricultural sector, likely effect on the price policy on rest of the economy and a minimum of 50% as the margin over the cost of production”. Government is talking about free market and independence of the farmers on one side and on the other side, why the Govt. has included the factors such as “terms of trade between agriculture and non agricultural sector” and above all “likely effect on the price policy on rest of the economy”? We could get the clarity in this regard from the “Price Policy for Rabi crops, the marketing season 2020-’21. Likely impact of price policy on rest of the economy means- “… particularly on cost of living, level of wages, cost structure and competiveness of agriculture and agro-based commodities…. Have been considered”. R.S. Tomar’s announcement conceal these factors.

For example, a host of criteria has been decided, like impact on industrial prices, problems inherent in subsidies, impact on standard of life, impact on general prices, international price situation, impact on PDS etc. What is the relation with the deciding of the MSP? It means due to the increase of MSP, the prices of other commodities should not increase, subsidies should not increase. In one way or the other, the govt. policy pursued by successive governments has kept under priced the MSP for agricultural produce. Such are the severe conditions for determining prices of agricultural commodities which are not there for prices of commodities in any other sector. In fact, in these sectors the producers themselves decide the prices. We will not come across any organizations, individuals deciding prices that are less than production costs. The policy and method being adopted by the CACP to determine production costs and the policy for deciding minimum support price are absolutely flawed. In some form or other, MSP is pushed down to a low level. On several occasions MSP was decided to be much lower than production costs. To put it straight, governments have been adopting policies that protect the interest of industrial, trading corporate houses while putting the noose around agriculture. Whatever be the government at the centre, the ruling classes are adopting such same policies.

For instance, the production costs envisaged by states for 2020-‘21 plus the recommendation of Swaminatham commission, that is addition of 50% to the cost of production. Table-1 shows the details of Additional income accruing for a quintal in 1 ha, and 1 acre.

Table-1: State Governments estimation of cost of production of paddy for

2020-’21 Kharif Marketing Season and the additional income for 1 Quintal, 1 H.A, and 1 Acre, if Swaminathan recommendation of C2+50% implemented and the details of yield for 1 H.A. and MSP announced by the Central Govt.

 

Sl. No.	Name of the State	Estimation cost of production for 1 Quintal paddy	If 50% added to MSP for 1 quintal (Rs.)	MSP announced by the central Govt. (Rs.)	Additional income for 1 quintal (Rs.)	Yield in 1 HA (quintals)	Additional income (C2+50) 1 HA (Rs.)	Additional income over MSP in 1 Acre (Rs.)
1	2	3	4	5	6	7	8	9
1	Andhra Pradesh	1902	2853	1888	965	60	57900	23160
2	Haryana	2162	3243	1888	1345	48.8	65636	26250
3	Karnataka	1939	2908	1888	1120	80.0	89600	35840
4	Kerala	2758	4137	1888	2249	37.6	84562	33825
5	Punjab	1868	2802	1888	914	61.7	56394	22558
6	Telangana	2529	3793	1888	1905	51.0	97155	38862
7	Uttar Pradesh	1526	2289	1888	1401	33.13	44443	18577
8	West Bengal	2147	3220	1888	1332	43.9	58475	23390
9	Bihar	1688	2532	1888	644	38.0	24472	9789
10	Tamilnadu	1735	2602	1888	514	47.0	24158	9663

 

(Source: Commission for Agricultural Costs and Prices, Kharif Marketing Season – 2020-‘21) (Author’s estimation in the Column No. 4, 6, 8, 9 basing on CACP Report.)

 

According to the report of the Agricultural Costs and Prices Commission for 2020-‘21 by the state governments for the kharif season and in accordance with the recommendation of Swaminathan commission, the loss incurred by the farmer for one quintal of paddy is as follows: AP-Rs.965, Haryana-Rs.1345, Karnataka- Rs.1120, Kerala-Rs. 2249, Punjab-Rs. 914, Telangana – Rs. 1905, UP-1401, WBRs. 1332, Bihar- Rs. 644 and for Tamilnadu – Rs. 514. If the same is seen in terms of acre land holding the income loss of the peasantry is as follows: AP-23,160, Haryana – Rs. 26,250, Karnataka – Rs. 35,840, Kerala – Rs. 33,825, Punjab- 22,558, Telangana – Rs. 38,862, UP-18,577, WB-23,390, Bihar- 8,789 and Tamilnadu – Rs. 9,663. What is surprising is that only in states of UP, Bihar, Tamilnadu, Punjab the MSP as decided by the central government is more, ranging between Rs. 20 to 350. This is above the production cost estimated by the respective State Governments. But in the rest of the states the MSP for 1 quintal is far below the production costs ranging from Rs. 47 to 690. The state governments by reporting to the centre about production cost feel that they have done their bit and that they have no responsibility in fixing MSP. The government policy of deciding MSP below the production costs leads to the intensification of the crisis and transforms the peasants into beggars. No patriotic, sovereign government would do this and it amounts to treachery and betrayal to the country.

The states, based the Swaminathan Commission’s C2 formula, are sending to the Centre the estimated cost of production of different crops. In the recent past the CACP, too at the behest of oral directions of the Central Govt, is recommending the MSP for different crops not on C2 formula but on A2+FL formula. Some states including the ones under the BJP rule wrote letters to the Central Govt asking the latter to reject the MSP proposals of CACP and adopt C2 formula plus 50%. Nine states asked the Central Govt to fix the MSP for 2019-20 Rabi season crops on C2 plus 50 formula.

1) BJP led Yogi Adityanath government in UP wrote 12 page letter to the central government. In this letter the Yogi government stated that the price estimated using C2 formula for paddy was Rs.1679/- for 2019-20 and asked to fix the MSP at Rs. 2520/- by adding 50%. It asked the Centre to fix the MSP for Bajra at Rs.2265, for Maize at Rs.2225, for black gram at Rs. 6225, for green gram at Rs.635, for Red gram at Rs.5855, for groundnut at Rs. 5390, for Soya at Rs. 4245 and for Sesame at Rs. 6660/-.

2) The Devendra Fadnavis led BJP -Shiv Sena coalition government in Maharashtra asked the central government to adopt C2+50 formula for fixing the MSP in its letter dated 17/5/2019. It urged the Central Govt to fix MSP for paddy at Rs.3921/-, for maize at Rs 4002, for green gram Rs. 9943, for black gram at Rs.8551/-, for groundnut at Rs.9416, for Soya at Rs. 5755, for sunflower at Rs, 7534, for cotton at Rs.7664/-.

3) Ashok Gehlot led Rajasthan Govt urged the centre to adopt C2+50 formula for fixing MSP in its letter dated 13.5.2019 and proposed for Maize at Rs.2650/- for Soya at Rs. 4500, for black gram at Rs. 6200, and for green gram at Rs. 8600/-.

4) Manohar Khattar led Haryana govt in its letter dated 18.5.2019 said the CACP recommendations do not even meet the production expenses and urged the Central Govt to fix the MSP for paddy between ₹2650-2750, for groundnut at Rs.6000, for maize at Rs. 2350, for cotton ar Rs.7050, for Red gram at Rs. 7850, for green gram at Rs.9500, for black gram at Rs.7400, and for groundnut at Rs. 6000,/-

5) Yadyurappa led Karnataka Govt. while rejecting the CACP recommendations urged the Central Govt to follow Swaminathan Commission’s formula. In its letter dated 29.6. 2019, it stated that in Karnataka agricultural expenses and prices commission has been working since 2016 and that this commission estimates production costs and makes recommendations and that the MSP goes up very minutely if the CACP recommendations are implemented and asked the Central Govt to adopt C2+50 formula.

6) Chhattisgarh govt asked to follow C2+50 formula. It urged the central govt. to fix the MSP for paddy at Rs.2500, for red gram at Rs. 6800, for green gram 7300, for black gram at Rs.6800, for groundnut at Rs.5800, for Soya at Rs.3800, for sunflower at Rs.6500, and for Sesame at Rs. 6500. When the central govt rejected its recommendations, the state govt. urged the central govt to give bonus. but the centre declined to pay any bonus and it warned the state govt not to give any bonus and if the state govt. goes against its warning it said it won’t buy that paddy which was supported by state’s bonus.

7) West Bengal Govt. wrote in its letter dated 8.5.2019 to the Central Govt that CACP recommendations are not good and urged the latter to fix the MSP for paddy at Rs.2100, by following the C2+50 formula.

8) Tamilnadu govt urged the Centre to fix the MSP for paddy at Rs.2700, for Jowar at Rs.2700, for Bajra at Rs,2150, for Raagi at Rs 3150, for maize at Rs.2100, for Red gram at Rs.6300, for green gram at Rs. 7700, for black gram at Rs. 6200, for groundnut at Rs.5400, for cotton at Rs 6200 and for long staple cotton between Rs 9000 and 10,000/-.

9) Naveen Patnaik led Odisha govt , in its letter dated 1.7.2019 said the formula C2plus 50 be used for fixing the MSP but not A2+FL and asked the MSP for paddy at Rs. 2930, for green gram at rs.7400, for black gram at Rs. 5850, for groundnut at Rs. 5140, for sunflower at Rs.5500, for cotton at Rs.5350 and for long staple cotton at Rs.5650/-.

Modi govt rejected these proposals and in a bid to protect the interests of domestic and foreign Corporates it is declining to adopt the C2+50 formula.

Chart-5 shows the estimate of the CACP, comprehensive costs of agriproduction (C2) adding to it the Swaminatham Commission recommendation of 50%, what should be the MSP then, what will be the additional income for the farmer for one quintal per 1 ha and for 1 acre.

Table 5: Commission for Agricultural costs and prices (CACP) projected the

cost of production (C2) of Kharif crops for KMS 2020-21. Details of additional income for 1 quintal, for 1 HA and for 1 Acre, if we add 50% to C2, according to Swaminathan Commission and estimation of yield per 1 HA and the M.S.P. announced by the central govt. for the Kharif Marketing Season 2020-2021(Rs.)

Sl. No.	Name of the Crop	Cost of production for 1 Quintal (Rs.)	If 50% added to MSP for 1 quintal (Rs.)	MSP announced by the central Govt. for 1 quintal (Rs.)	Additional income for 1 quintal	Yield in 1 HA (quintals)	Additional income (C2+50) 1 HA (Rs.)	Additional income for (C2+50) for 1 Acre (Rs.)
1	2	3	4	5	6	7	8	9
1	Paddy	1667	2500	1888	632	26.59	16805	6722
2	Jawar	2393	3590	2620	970	979	9496	3798
3	Maize	1606	2409	1850	559	29.65	16574	6630
4	Ragi	2763	4145	3295	850	13.32	11322	4529
5	Arhar (Tur)	5464	8196	6000	2196	10.73	23563	9425
6	Moong	6289	9434	7196	2242	4.94	11075	4430
7	Groundnut	4512	6768	5275	1493	13.93	20797	11314
8	Soyabean	3513	5270	3880	1390	12.17	16916	6766
9	Sunflower	5079	7618	5885	1733	8.86	15354	6141

Source: Commission for Agricultural costs and prices, price policy for Kharif crops. The Marketing Season 2020-21.

(Column No.4, 6, 8, 9 are estimated by the author on the basis of CACP Report.)

There is more difference between the estimation made by the States and CACP. Which estimation is correct and how to know it? Why it has not been corrected so far? This problem has remained till now as big question and there is no proper explanation to this question. Keeping aside the estimates of various states, the estimates by the “Agricultural costs and Prices Commission,” the affiliate organization of the Union agriculture Ministry, the following income pattern will emerge, if we take into consideration the cost of production estimated by CACP – the peasantry would get n additional income if Swaminathan commission’s recommendation is implemented: For one quintal of paddy Rs. 632, for jowar 970, for corn Rs. 559, for ragi Rs. 850; for redgram Rs. 2196: for greengram Rs. 2242; for groundnut Rs. 1493; for soyabean Rs. 1390 and for sunflower Rs. 1733.

If the Swaminathan commission recommendation of C2+50% is implemented, the peasants will get an additional income for 1 acre is Rs. 6722 for paddy, Rs. 3798 for Jawar, Rs. 6630 for Maize, Rs. 4529 for Ragi, Rs. 9425 for red gram, Rs. 4430 for green grams, Rs. 8319 for groundnut, Rs. 6726 for Soyabean and Rs. 6141 for Sunflowers.

The Central Government is not only not implementing the recommendation of the Swaminathan Commission regarding MSP i.e. C2+50 but not including the increasing cost for seeds, fertilizer, pesticides, ploughing, weeding and harvesting etc – increased input cost for the Kharif Marketing Season 2020-’21. CACP in its report estimated the agricultural inputs cost will increase 5.1% for the Kharif 2020-’21.

Table-6 The MSP commenced by the centre for the Kharif 2020-’21 and

percentage of increase over 2019-’20 KMS.

S.No.	Name of the Crop.	MSP announced for KMS 2019-’20	MSP announced for KMS 2020-’21	Percentage of increase
1	2	3	4	5
1.	Paddy General Variety Grade No.1	1815 1835	1868 1888	2.9 2.9
2.	Jawar Hybrid General Variety	2550 2570	2620 2640	2.7 2.7
3.	Bajra	2000	2015	7.5
4.	Ragi	3150	3295	4.6
5.	Maize	1760	1850	5.1
6.	Redgram	5800	6000	3.4
7.	Green gram	7050	7196	2.1
8.	Black gram	5700	5885	3.4
9.	Groundnut	5090	5275	3.6
10.	Sunflower	5650	5885	4.2
11.	Soyabean	3710	3880	4.6
12.	Sesame	6485	6855	5.7
13.	Lineseed	5940	6695	12.7
14.	Cotton Middle Variety Long Staple Cotton	5215 5215 5550	5255 5255 5825	4.9 4.9 5.0

The above table shows, how low are the MSP announced by the centre and especially less compared to the raising prices. The MSP for Kharif crop was announced only for 12 crops and even that too was lesser than the increased cost of inputs.

Now we examine the MSP announced for RMS 2020-’21. Let us see the cost of production for wheat estimated by different states, the MSP according to the formula formulate by Swaminathan Commission, the MSP, if it is calculated on the basis of estimation of C2 made by CACP and the MSP as per the formula of Swaminathan commission C2+50 and the additional income accrue to the farmers for 1 quintal of wheat.

Table-7

S.No.	Name of the State	Estimation for 1 Q. cost of production	MSP if 50% adds.	MSP announced By the centre	Additional income or less income for 1 Q.
1	2	3	4	5	6
1.	Bihar	1452	2178	1975	`203
2.	Gujarat	1504	2256	1975	`281
3.	Haryana	1461	2192	1975	`217
4.	Himachal Pradesh	2163	3245	1975	`1270
5.	Jarkhand	1681	2522	1975	`547
6.	Madhya Pradesh	1314	1971	1975	G4
7.	Maharastra	2408	3612	1975	`1637
8.	Punjab	1238	1857	1975	G118
9.	Rajastan	1354	2031	1975	`56
10.	Utterpradesh	1521	2282	1975	`307
11.	Utterakhand	1429	2144	1975	`169
12.	Average-India	1425	2138	1975	`163

 

 (Agricultural costs and prices commission, RMS 2021-’22, P.120)

(Columns 4 & 6 are calculated by the author)

MSP was Rs. 118 more in Punjab and Rs. 4 in M.P. than the cost of production+ 50, estimated by the respective States. But, in the remaining states MSP was less by Rs. 56 to Rs. 1637 than the cost of production + 50, estimated by the states and to that extent, the farming communities are losing their income. Even if 50% added to C2 estimated by CACP, the farmer could get an additional income Rs. 163 per quintal of wheat.

Farmers not able to get the MSP in the market declared by the centre on the basis of A2+FL also. MSP for wheat during year 2018-19 in the market was on an average less than 2.9%. But, during the year 2019-’20 the wheat average price in the market was 1.3% more on MSP. But in U.P. and Rajasthan States it was less than MSP in the market and pulses’ average rate was less than the MSP. According to the CACP report, it was 7.0% 2020-’21 (P.90).

Keep aside the estimation on cost of production by states and CACP, the MSP has not been increased even on par with the increase of prices also. The above stated report of the CACP said, input cost of production could increase 6.4% for rabi crops (p.82) but the MSP was increased only between 2.1% to 6.2%.

Table-8 MSP increased for the RMS 2021-’22 by the centre and the

percentage of increase in Rs.

S.No.	Name of crop	2020-’21 MSP	2021-’27 Announced MSP	Percentage increased MSP
1	2	3	4	5
1.	Wheat	1925	1975	2.6
2.	Barley	1525	1600	4.9
3.	Redgram	4875	5100	4.6
4.	Maruri Pulse	4800	5100	6.2
5.	Mustard	4425	4650	5.1
6.	Sefflower	5215	5327	2.1

Modi Government announced the MSP to Rabi crops, and they are less than the increased cost of inputs. Hence, the MSP announced by the centre is not increasing the income of farmers but decreasing their income and drowning them in debt.

OED and ICRIER joint study report clearly came to the conclusion that whichever Government is in power, it consciously keeps the MSP at low level. The policies pursued by the government kept the MSP under pricedfor  agri produce.

“This implies that domestic producers were implicitly taxed. This is partly policy – induced and partly related to other inefficiencies in the marketing chain policy. Induced inefficiencies are due to minimum support prices being set below international prices for several commodities at different periods between 2000 and 2016, to domestic regulations, and to trade policy measures”. (P.18)

“… Negative market support indicates that the prices received by farmers, as measured for the purposes of this report, are lower than the prices prevailing on international markets for the comparable commodity. Almost all of the commodities studies individually experience at least one year of negative market price support in the 2000 to 2016 period”. (ibid, P.36)

“For paddy, on the other hand, the MSP was set below the international price of paddy in all years in the 2012 to 2016 period” (ibid, P.161).

It was stated in the CACP Report 2020-’21, the price of paddy in the market is less 4.7% in 2018-’19 and 3.8% in 2019-’20 than the announced MSP by the centre.

The policy of deciding the MSP less than the cost of production and even lesser than the increased prices is leading the farmers into debt trap and making them paupers. For development and self sustainability no patriotic government could do this kind of betrayal.