rabi msp hike

As Farmers Wait For Rabi Procurement, Numbers Do Little to Dispel Worries

In Bihar 9,035 procurement centres set up in 2015-16 for the purchase of wheat decreased by more than 82% to 1,619 centres in 2019-20.

New Delhi: Amid rising coronavirus cases in India and the ongoing nationwide lockdown to deal with the pandemic, the agriculture sector has been reeling under a crisis relating to the procurement of rabi crop. In several states, most of the rabi crop has been harvested and farmers are awaiting an appropriate announcement from the government regarding the procurement of crops and their management.

The central and state procurement agencies will have to adopt a fairly decentralised approach to eliminate the possibility of any threat from the epidemic during procurement, such as procuring from centres set up at single or multiple village level.

Procurement centres play a crucial role in ensuring that farmers receive remunerative prices for their crops. However, official data shows that the Centre and state governments have been unable to effectively set up and operate procurement centres.

The situation is such that between 2015-16 and 2019-20, wheat procurement centres fell by 25% in the country even though wheat production increased during that period.

The main factor behind the decline is the situation in Bihar. According to data from the Food Corporation of India (FCI) accessed by The Wire, 9,035 procurement centres were set up in Bihar in 2015-16 for the purchase of wheat which decreased by more than 82% to 1,619 centres in 2019-20.

Meanwhile, 7,457 centres were set up for wheat procurement in the state in 2016-17, 6,598 centres in 2017-18, and 7,000 in 2018-19.

Owing to the shortage of such centres, a large number of farmers are unable to avail the Minimum Support Price (MSP) and the price of agricultural produce in the market remains much lower than the MSP.

The impact of the decline in procurement centres on wheat procurement in the state is evident as, during the last five years, not even 1% of the total wheat produced has been procured in Bihar.

Also read: Exclusive: Centre Rejected MSP Hike Recommendations by Several BJP-Ruled States

Last year, only 0.05% of the total produce was procured in Bihar. Earlier, in 2018-19, only 0.29% wheat was procured even though Bihar accounted for 5.8% of total wheat production in the country.

The government of India purchases rabi and kharif crops at MSP every year at a stipulated time. The food grain is distributed under the food security schemes of the Centre, mid-day meals, nutrition programs, etc. A buffer stock is also stored up to a level which is used to meet public food requirements during exigencies like the coronavirus pandemic.

There are mainly two methods of procurement. First, the FCI procures excess stocks for the central pool through the state or its own agencies.

The second is the decentralised procurement system (DCP) under which the state government itself undertakes the direct purchase of grains, their storage and distribution in the state. The surplus that remains after the allocation of food grains for welfare schemes in the state is then handed over to FCI for the Central Pool stocks.

In case, there is a shortage of essential food grains in a state under the National Food Security Act (NFSA), the FCI meets the demands by procuring grains from other states.

Currently, 17 states in the country fall under the purview of the DCP. Bihar adopted the DCP system for procurement of wheat and paddy in the kharif season of 2013-14, under which procurement is carried out through trade unions or bodies and Primary Agricultural Credit Society (PACS).

However, the condition in Bihar is so poor that the state is unable to procure wheat for distribution under the Public Distribution System (PDS).

Bihar FCI general manager, Sandeep Kumar Pandey, said, “During the last five or six years, wheat procurement in Bihar has been almost nil. We fulfil 80% of the state’s requirement of food grains by purchasing from outside.”

Former MLA of Bihar and general secretary of Akhil Bhartiya Kisan Mahasabha, Rajaram Singh says, “A major reason why there is no procurement in the state is that the farmers here are not landowners.”

He said that a significant portion of agricultural activity is carried out on leased land. Since the tenant farmers do not possess papers of the land, they are unable to sell the produce on MSP.

He said, “After a long struggle, the farmers succeeded in principle when those who do not own land and work as tenant cultivators were allowed to sell their produce on MSP. But it was never implemented. When a farmer takes his grains to the market, he is asked for papers which he is unable to provide.”

In Rajasthan, another major wheat-producing state, there already existed a limited number of procurement centres but during the last five years, the number has further declined.

Also read: As Mills Delay Payments Like Every Year, Lockdown Adds to Sugarcane Farmers’ Woes

In 2015-16, 271 centres were set up in Rajasthan for wheat procurement. Of these, 155 belonged to FCI while 116 belonged to state agencies. However, the number has fallen to 204 by 2019-20. In 2016-17, the number of centres was 303, 208 in 2017-18 and 229 in 2018-19.

Last year, 1.4 million tonnes of wheat was procured in Rajasthan, which is 14.57% of the total harvest. During this period, Rajasthan accounted for 9.3% of total wheat production in the country. However, the number of farmers benefitting from the MSP is still quite less as only 4% of farmers in Rajasthan are eligible for availing the MSP.

Limited procurement in Uttar Pradesh despite the highest number of procurement centres

Uttar Pradesh is the largest wheat producing state in the country but only 7% farmers in the state avail the MSP.

In Punjab, more than 80% of farmers avail the MSP though the state has only 3% wheat cultivators of the country.

The Commission for Agricultural Costs and Prices (CACP), an organisation under the Union Agriculture Ministry which recommends the MSP, has claimed in several reports that in order to ensure that the MSP is claimed by farmers and to tackle the problem of prices falling below the MSP in domestic markets, the procurement machinery needs to be strengthened.

The CACP also directed procurement agencies to set up temporary procurement centres in far-flung areas of the country so that the benefits of MSP can reach farmers.

According to documents obtained by The Wire, Uttar Pradesh has the largest number of procurement centres when compared to other states but the procurement is far less.

File photo of a wheat farm in Gujarat. Credit: Meena Kadri/Flickr CC BY 2.0

File photo of a wheat farm in Gujarat. Photo: Meena Kadri/Flickr CC BY 2.0

For the procurement of wheat, a total of 6,685 procurement centres in Uttar Pradesh with 89 centres per district on an average, 204 centres in Rajasthan with 6 centres per district on an average, 3,545 centres in Madhya Pradesh with 68 centres per district on average and 1,836 centres in Punjab with 83 centres per district on average were set up last year.

Despite this, however, only 11.3% of the total crop was procured in Uttar Pradesh. Even though UP had the highest share, that is 31.4%, of the total production in the country. In Punjab, 72.62% of the total harvest was purchased. Haryana had the highest with 79.97% procurement while in Madhya Pradesh only 38.76% harvest was procured.

The president of the All India Kisan Sangharsh Coordination Committee (AIKSCC), VM Singh, said, “The main reason behind the decline in procurement is the nexus between procurement centres and big traders.”

Also read: With No Combine Harvesters Available, Farmers Unable to Harvest Ready Crops

“The procurement centres are either closed or they make purchases from big traders instead of procuring grains from small farmers,” says Singh. “Taking advantage of the farmers’ lack of awareness regarding the centres as well as prevalence of corruption, the big traders first purchase wheat from farmers at prices much lower than the MSP and then sell it on MSP.”

In 2015-16, there were 20,088 wheat procurement centres in the country. In 2016-17, the number slid down to 18,181 and further declined to 17,596 in 2017-18.

However, an increase in wheat procurement centres was witnessed in the year 2018-19 and the figure reached 19,280. But the next year, there was a steep fall in the number of wheat procurement centres. Declining by 26.31% as compared to 2015-16, the figure fell to 14,838.

Nearly 95% procurement centres are run by state agencies. In 2019-20, FCI had 728 wheat procurement centres, that is, only 5% of the total number of such centres.

The declining number of procurement centres has had a visible impact on farmers. During the rabi procurement season of 2019-20, a total of 3.56 million farmers benefitted from MSP, which is about 0.4 million less than 3.98 million farmers who availed the MSP in 2018-19 even though wheat production has increased considerably during the period.

In 2016-17, the total production of wheat was 98.5 million tonnes. It increased to 103.6 million tonnes in 2018-19. Of this, 34 million tonnes was procured – only 33% of the total produce.

Owing to a dearth of procurement centres, not only are farmers unable to benefit from the MSP, but even the market price of agricultural products remains below the MSP.

According to Agmarknet, a government agency which gives the daily market price of agricultural products, in the rabi procurement season of 2019-20, the market price of wheat remained below the MSP in Uttar Pradesh on 56% of the total number of days between March and June. Similarly, the market price of wheat remained below the MSP 42% of the total number of days in Rajasthan and 27.7% of the days in Madhya Pradesh.

Earlier, the market price of wheat in the rabi procurement season of 2018-19 was 98.9% in Uttar Pradesh and 84.1% in Rajasthan. Both the states account for 41% of the total wheat production in the country.

Translated from Hindi by Naushin Rehman. You can read the Hindi original here.

Exclusive: Centre Rejected MSP Hike Recommendations by Several BJP-Ruled States

Official documents obtained by The Wire also revealed that, due to different cultivation costs of various crops in different states, a single MSP was unable to meet the demands of farmers.

New Delhi: Before parliament’s budget session began, President Ram Nath Kovind, in his address to the joint session of parliament on January 31, said that the Centre is working with dedication to provide farmers with prices that are 1.5 times the input costs. He further stated that a steady increase in the minimum support price (MSP) for kharif and rabi crops is a step in this direction. However, the president’s claim does not match the reality of MSP as recorded in official files.

Official documents obtained by The Wire under the Right to Information Act reveal that several state governments, including those of BJP-ruled states, had not agreed to the MSP of crops decided by the Central government and had demanded changes.

According to government records, the Centre is paying 1.5 times the cost of the crops on the basis of A2+ FL instead of paying it on the basis of C2 as recommended by the Swaminathan Commission and demanded by the state governments.

A2 + FL cost includes all cash transactions and payments made by the farmer, including the cost of family labour. It also includes the rental value of the leased land. C2 includes A2 + FL cost as well as rent of owned land and interest on owned capital.

On July 3 last year, the cabinet approved the MSP for kharif crops for 2019-20. As compared to 2018-19, there was a slight increase of 3.7% in the MSP of paddy, 4.9% of jowar, 2.6% of millet, 3.5% of maize, 1.1 % of moong, 1.8% of urad, and 2.0% of cotton.

Under the chairmanship of Prime Minister Narendra Modi, the cabinet approved the MSP of crops based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) of the Union Ministry of Agriculture. However, documents reveal that the governments of Chhattisgarh, Haryana, Maharashtra, Rajasthan, Uttar Pradesh, Puducherry, Tamil Nadu, Odisha and Karnataka opposed this.

In fact, comments from the governments of Tamil Nadu and Karnataka were not included in the cabinet note despite the fact that they were received before the cabinet meeting. A cabinet note is an important document on the basis of which the cabinet decides on any subject.

Also read: Government Announces Marginal Increase in Rabi Crop MSP

If all crops falling in the purview of MSP are included, the margin of total profit is only 14% over cost C2. That is, the MSP has been decided by adding only 14% to the cost C2.

Official documents also reveal that due to different cultivation costs of various crops in different states of the country, a single MSP is unable to meet the demands of farmers across different states. As a result, many states have raised objections.

West Bengal

Responding to a letter dated April 22, 2019, sent by the Union agriculture secretary Sanjay Agarwal, the West Bengal government wrote on May 8, 2019 that the CACP had recommended the MSP for paddy at Rs 1,815 per quintal against the Rs 2,100 per quintal proposed by the state based on its assessment.

West Bengal asking for the MSP of paddy to be increased.

Citing the state’s calculations, joint secretary of the state agriculture ministry Jitendra Roy wrote, “The Estimated C2 Cost of cultivation of paddy in West Bengal during 2017-18 was Rs 1,751 considering Minimum Wages as declared by the Department of Labour, Govt. of West Bengal. Considering an average increase @9% in cost of various inputs and labour charges, the projected C2 Cost of cultivation of paddy in West Bengal during 2019-20 is Rs 1,909.”

On the basis of this assessment, the West Bengal government had requested the Centre to increase the MSP of paddy to Rs 2,100 per quintal instead of Rs 1,815 per quintal. However, the government did not accept the state’s recommendation.

Chhattisgarh

Similarly, the Chhattisgarh government had also demanded that the Centre increase the MSP, in its letter dated May 3, 2019. In the three-page letter, the state agriculture department had calculated the cost of major kharif crops in detail and asked for an increase in the MSP.

Incorporating several aspects in the cost such as cost of labour, interest on land, rent of leased land, expenditure on guarding, and expenditure on transportation, the state government recommended an increase in the MSP of paddy, ragi, maize, arhar, moong, urad, groundnut, soybean, sunflower and sesame to Rs 2,500, Rs 3,100, Rs 1,800, Rs 6,800, Rs 7,300, Rs 6,800, Rs 5,800, Rs 3,800, Rs 6,500 and Rs 6,500 per quintal respectively.

Production costs assessed by the Chhattisgarh government.

Contrary to the demand of the state, the Centre has fixed the MSP at significantly lower rates for the above mentioned crops, that is, Rs 1,815, Rs 3,150, Rs 1,760, Rs 5,800, Rs 7,050, Rs 5,700, Rs 5,090, Rs 3,710, Rs 6,485 and Rs 6,485 per quintal respectively.

On the MSP recommended by the CACP, the government of Chhattisgarh wrote “The price recommended by the Commission is much lower for different crops as compared to the proposal of the Government of Chhattisgarh. Therefore, in crops where the MSP is less than the proposal sent by the state government, take necessary action to determine the MSP as proposed by the state government in column no. 3.”

Also read: Kharif MSPs Increased Marginally; Paddy up 3.7%, Tur 2%

After the Centre rejected the MSP as proposed by the state, the Chhattisgarh government demanded a bonus on paddy. However, the Centre viciously opposed it saying, that if the Chhattisgarh government offered a bonus on paddy, the Centre would not buy it.

Women working in the rice paddy fields. Credit: Trócaire/Justin Kernoghan/Flickr

Women working in the rice paddy fields. Photo: Trócaire/Justin Kernoghan/Flickr

Maharashtra

The former BJP-Shiv Sena government of Maharashtra led by Devendra Fadnavis had also raised objections against the MSP of Kharif crops as decided by the Centre.

On May 17, 2019, the secretary of the state agriculture department Eknath Davle sent a letter demanding an increase in the MSP, in which he wrote, “On March 29, 2019, the state government sent a letter with recommendation and proposal on the MSP. But the MSP fixed for kharif crops by the CACP is much lower than those proposed by the state government.”

The letter further added, “Therefore, you are requested to consider the earlier proposal sent by the Maharashtra government and increase the MSP for kharif crops.”

The then-Fadnavis government had recommended that the MSP of paddy, jowar, millet, maize, arhar, moong, urad, groundnut, soybean, sunflower and cotton be increased to Rs 3,921, Rs 3,628, Rs 4,002, Rs 2,001, Rs 6,161, Rs 9,943, Rs 8,556, Rs 9,416, Rs 5,755, Rs 7,534 and Rs 7,664 per quintal respectively. This amount was much higher than the MSP decided upon by the Centre.

Meanwhile, the Centre had already warned that no state would offer bonus on the MSP that has been fixed as it would lead to market distortion.

Haryana

On similar lines, Haryana, another BJP-ruled state, also demanded an increase in the MSP for kharif crops. The state said that the MSP recommended was not even equal to the cost of cultivation.

After examining the CACP report, the state agriculture department said in its letter, sent on May 18, 2019, “It is pertinent to mention that the price of diesel, pesticide, fertiliser, machines and other inputs has increased this year as compared to the previous year. Lower availability of labour is also a major contributor in increasing the cost of cultivation.”

The letter further stated, “The proposed pries by CACP are too less compared to increased cost of cultivation in the State of Haryana. Haryana is the major producer of rice in the country. CACP recommended the MSP of two varieties of paddy at Rs 1815 and 1835 per quintal for the year 2019-20 which is only Rs 65 per quintal increase from last year MSP.”

The Department of Agriculture and Farmers Welfare, Haryana, rejected the MSP recommended by the CACP and said that it was not in line with the increase in the cost of cultivation. The Khattar government had demanded that the Centre fix the MSP of paddy at Rs 2,677 per quintal instead of Rs 1,815 per quintal.

In its two-page letter, the Haryana government said, “MSP recommended by CACP is not commensurate with the enhanced cost of production on account of rise in input cost in the state. Therefore, the MSP of paddy should be at least to Rs 2,650-2,750 per quintal in the best interest of the farmers of the State of Haryana.”

Also read: Why MSP at 1.5 Times Cost Is Another Empty Promise for Farmers

Describing the distressing economic situation of farmers in rain-fed areas, the Haryana government wrote that bajra is the main crop using less water and is better suited for such areas but the MSP fixed by the Centre for millet is quite less.

The letter stated, “Department of Agriculture and Farmers Welfare has estimated the input cost for the crop as Rs 2,170, but the CACP has recommended Rs 2,000 per quintal as the MSP. Thus, the recommendation for MSP of Bajra from the state is that it should be Rs 2,200 per quintal.”

Haryana Govt. letter to inc… by The Wire on Scribd

However, the government did not increase the MSP for millet.

It is the same for maize. The state government wrote in its letter, “This crop is an important cereal crop and fodder crop yet its area and production have steadily decreased due to low MSP.

It is noteworthy that states like Haryana and Punjab are currently facing a terrible water crisis due to rampant cultivation of paddy. Therefore, the state government is focusing on crops other than paddy which require a lesser amount of water.

Offering the suggestion that maize cultivation may be used in the direction of water conservation, the state government said, “Maize requires lesser quantity of water as compared to Paddy and its cultivation should be encouraged on the grounds of water conservation and crop diversification.”

The letter stated, “The state government is making strong efforts for diversification of Paddy to Maize crop, therefore, we need strong support for increasing the MSP of this crop for adoption by the farmers.”

However, according to the state, the MSP recommended by the Centre does not even cover the cost of cultivation.

The state said, “CACP has recommended Rs 1,760 per quintal which is very less and does not even cover the cost of cultivation. The MSP of Maize should be fixed at Rs 2,350 per quintal.”

Citing a rise in the cost of production due to increased pest attacks, the Khattar government asked the Centre to fix the MSP of cotton at Rs 7,000 per quintal instead of Rs 5,255. MSP for the cotton crop is not adequate to cover the costs, the letter said.

In addition, the Haryana government proposed that the MSP of other crops like Arhar, Moong, Urad, and Groundnut may be fixed at Rs 7850, Rs 9500, Rs 7400 and Rs 6600 per quintal respectively.

A veiled woman farmer harvests a wheat crop in a field on the outskirts of Ajmer in Rajasthan, April 4, 2015. Photo: Reuters

Rajasthan

Responding to a letter dated April 22, 2019, sent by the agriculture ministry regarding MSP fixed by the Centre, the Rajasthan government issued a letter on May 13, 2019 expressing its disapproval of the MSP recommended by the CACP and demanded to raise it citing the increased cost of cultivation in the state.

The state government wrote in its missive, “Due to most part of the state being a desert region and owing to adverse rainfall conditions, the cost of crop cultivation is higher as compared to other states.”

Also read: Budget Fails Yet Again to Present a Roadmap to Increase Rural Demand, Double Farmers’ Income

As a result, the Rajasthan government demanded an increase in the purchase price of millet, maize, soybean, urad and moong. The state government recommended that the MSP of millet should be fixed at Rs 2,200 per quintal instead of Rs 2,000 per quintal as fixed by the government of India.

In addition, the state demanded an increase in the MSP of maize (from Rs 1,760 to Rs 2,650 per quintal), soybean (from Rs 3,710 to Rs 4,500 per quintal), Urad (from Rs 5,700 to Rs 6,200 per quintal) and Moong (from Rs 7,050 to Rs 8,601 per quintal).

In a letter addressed to the Union agriculture secretary Sanjay Agarwal, Rajasthan chief secretary DB Gupta wrote, “Since the state of Rajasthan has an important place in the country in terms of both sowing and cultivation of these crops, kindly do the needful in giving priority and importance to the MSP proposal sent by the state in determining the minimum support price of these crops.”

However, the Centre did not accept the demands made by the state.

Uttar Pradesh

The Yogi Adityanath government of Uttar Pradesh also disapproved of the MSP of kharif crops proposed by the Centre for 2019-20 season recommending the MSP be fixed according to the cost of production of the state. This was revealed by a 12-page confidential letter issued by the UP government obtained by The Wire.

In its letter to the Ministry of Agriculture, the state government said, “The main basis for determining the minimum support price of crops is their cultivation cost. The cultivation cost of crops depends on expenditure incurred on human labour, animal labour, machine labour, land rent and agricultural investment, etc. used in cultivation.”

The UP government had demanded an increase in the MSP citing the reason that since the state had a large number of small and marginal farmers, the size of land holdings was very small and the farmers were unable to fully utilise resources and agricultural investments.

According to the state government, there are 92.81% small and marginal farmers in Uttar Pradesh. The size of land holdings was merely 0.73 hectares and for marginal farmers, it was only 0.38 hectares.

Documents obtained by The Wire reveal that there is a huge difference in the CACP and the UP government’s estimation of cost of cultivation owing to which the state government had sought an increase in the MSP.

Up government’s estimated cost of cultivation.

The Uttar Pradesh government carried out an estimation of the cost of cultivation under Director of Agricultural Statistics and Crop Insurance, along with agricultural economists of agricultural universities. The state had included many aspects in the cost of cultivation such as human labour, machine labour, cost of medicines, insurance premium, rent of land, as well as interest.

Based on this, the state assessed the Cultivation Cost (C2) of paddy to be Rs 1,679 per quintal and recommended the MSP to be Rs 2,520 per quintal. However, the Centre assessed C2 of paddy at Rs 1,619 per quintal and fixed the MSP at Rs 1,815 per quintal only.

Also Read: Farmers’ Losses Mount to Rs 1,000 Crore as October Prices Fall Short of Kharif MSP

The cost of cultivation projected by CACP for other crops is higher as compared to that of the Uttar Pradesh government. But the MSP proposed by CACP is much lower than the state government proposed prices. The reason is that CACP has fixed the MSP on the basis of A2 + FL (which is much lower than C2) instead of C2.

The UP government had recommended to set the MSP at Rs 2,265, Rs 2,225, Rs 6,225, Rs 6,375, Rs 5,855, Rs 5,390, Rs 4,245 and Rs 6,660 per quintal for bajra, maize, urad, moong, arhar, groundnut, soybean and sesame respectively.

However, the Centre rejected the recommendations of the state.

The state government wrote, “Keeping in mind that the majority of the state’s population is dependent on agriculture and related activities, the minimum support price should be announced as per the cost estimated by the state agriculture department so that the farmers can get remunerative prices for their crops and the migration of farmers from agricultural region can be curtailed.”

Tamil Nadu

The Tamil Nadu government said that the proposed MSP of kharif crops for 2019-20 season was not adequate to fulfil the needs of the farmers.

In a letter dated June 24, 2019, the state government reasoned, “Factors such as annual rainfall, water availability, release of water from dams and fluctuation in its cost, and perennial rivers ceasing to flow play a crucial role in determining cultivation cost.”

The state further wrote, “With regard to pulses, low production and higher minimum support price of other food grains has pushed the cultivation of pulses to the margin. Therefore, the production of pulses can be encouraged by increasing their MSP.”

The Tamil Nadu government said: “The cost of production alone does not determine the minimum support price. Factors like social and economic condition of farmers should also be kept in mind so that the farmers can be given a dignified life.”

On this basis, the state government recommended the MSP as Rs 2,700, Rs 2,750, Rs 2,150, Rs 3,150, Rs 2,100, Rs 6,300, Rs 7,700, Rs 6,200, Rs 5,400 and Rs 6,200 for paddy, jowar, bajra, ragi, maize, tuar (arhar), moong, urad, groundnut and cotton respectively.

A farm worker harvests maize crop in a field on the outskirts of Ahmedabad, India, February 1, 2019. Credit: REUTERS/Amit Dave

A farm worker harvests maize crop in a field on the outskirts of Ahmedabad, India, February 1, 2019. Photo: REUTERS/Amit Dave

In addition, the state government had demanded that the MSP of Extra Long Staple (ELS) cotton be fixed between Rs 9,000 to Rs 10,000 per quintal. The state government said that there is a need to set a separate minimum support price of ELS cotton so that cotton farmers may be encouraged to grow the crop.

Also read: Almost 75% Farmers Did Not Get All 3 PM Kisan Instalments, a Year After Implementation

However, the Centre did not accept the state’s recommendations.

Odisha

Expressing disapproval over the MSP recommended by the Centre, the Odisha government said that the CACP’s report revealed that the government’s price recommendations were based on A2 + FL cost whereas the state had suggested doing so on the basis of C2 cost which is a better representation of the cost of production.

In a confidential letter sent on July 1, 2019, the state government said, “Odisha being a major paddy growing state and having a robust procurement mechanism it is felt that its farmers would be hardly benefitted out of such marginal increase in MSP for Paddy.”

Letter sent by the Odisha government demanding an increase in the minimum support price for kharif crops.

Based on practical assessment of the cost of production in the state, the Odisha government recommended that the MSP for paddy be fixed at Rs 2,930 per quintal. Similarly, for maize, ragi, arhar, moong, urad, groundnut and sunflower, the following prices were recommended: Rs 1,800, Rs 3,000, Rs 5,900, Rs 7,400, Rs 5,850, Rs 5,140, and Rs 5,500 per quintal respectively. For cotton, the MSP was recommended at Rs 5,350 and Rs 5,650 per quintal.

The Centre, however, ignored the recommendations.

Karnataka

In a letter dated June 29, 2019, the then-Karnataka government advised the Centre to fix the MSP at one and a half times of C2 based on the recommendation of Swaminathan Commission and rejected the MSP decided by the Centre.

On the basis of information collected online from farmers by the Karnataka Agriculture Price Commission (KAPC) since 2016, the state government said that the cultivation cost assessed by them was much lower than the cost estimated by CACP.

The state government said, “The MSP fixed for the 2019-20 season is inadequate compared to the state’s cultivation cost. Because of this, the profit margin of the farmers is either little or negative.”

Comparing the cultivation cost and MSP, the state wrote that in case of arhar the MSP is not even equal to A1 + FL cost, due to which farmers do not seem to benefit at all.

Since, leasing land is not legally approved in Karnataka, A1 and A2 costs are the same.

The Karnataka government wrote, “If the C2 cost assessed by KAPC is included then the profit margin for crops other than maize and moong will become negative. Considering the implementation of one MSP across the country, if C2 cost is counted instead of A1 + FL cost, it would solve the problem of inequality in cultivation cost in all states of India.”

Keeping these aspects in mind, the state government said that considering the cost of cultivation of the state, a bonus should be given to the state government over the proposed MSP to compensate the farmers. The letter further read, “Therefore, the CACP’s assertion that giving bonuses causes distortion in the market should be reconsidered.”

Also read: Will PM-Kisan Eventually Evolve and Replace Farm Subsidies During Modi 2.0?

Besides, the state government in its 10-page letter also suggested other solutions for problems related to agriculture. However, the Centre did not accept the recommendations of the state. As a result, the state government announced in December last year that they would give a bonus of Rs 300 per quintal on the MSP of Arhar.

According to the data presented in the Lok Sabha recently by the Ministry of Consumer Affairs, Food and Public Distribution, the Food Corporation of India (FCI) has purchased a total of 333.42 lakh metric tonnes of rice and 341.32 lakh metric tonnes of wheat across the country till 30 January 2020.

Translated from Hindi by Naushin Rehman. You can read the Hindi version here.

Government Announces Marginal Increase in Rabi Crop MSP

The government has claimed that the increase is in line with the principle of setting MSP at ‘cost plus 50%’ but this claim is misleading.

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Wednesday announced the annual increase in minimum support prices of rabi crops for the 2020-21 marketing season.

The MSP of wheat has been increased by 6% to Rs 1,840 per quintal, while that of lentils has increased 5% to Rs 4,475 per quintal. Barley too has seen a minor increase of 2% to Rs 1,440 per quintal.

The maximum hike was for safflower, the MSP of which has been increased 20% to Rs 4,945 per quintal.

The government has claimed that the increase is in line with the principle of setting MSP at “cost plus 50%”. But this claim, as The Wire has pointed out in the past, is misleading. The government is able to claim that MSP is 50% more than cost by setting the lower of two costs between A2+FL (actual paid out cost plus imputed value of family labour) and C2 (comprehensive cost including imputed rent and interest on owned land and capital).

The Swaminathan Commission on farmers had recommended in 2006 that the higher of the two costs – C2 – be taken as base when the MSPs are set. It suggested that the MSP be at least 50% higher than C2. The implementation of these recommendations was promised by BJP before the 2014 Lok Sabha elections.

The government, though, has used A2FL as the base for setting MSP and claimed that it has fulfilled its election promise by setting MSP at cost plus 50%. But the MSP for most crops had already been giving farmers returns of over 50% the A2FL cost.

Also read: Why MSP at 1.5 Times Cost Is Another Empty Promise for Farmers

This practice has continued in this season’s announcement and the claim that MSP is 50% higher than the cost of production continues to be misleading.

The difference between A2FL and C2 costs can be substantial. For the 2019-20 marketing season, the Commission for Agricultural Costs and Prices – whose job it is to determine the costs of production and recommend the MSP to be set – has shied away from publishing the data for C2 costs.

But, if a comparison is made between the A2FL and C2 costs for the 2018-19 season, for which C2 data was published, it is clear that the difference between A2FL and C2 costs is substantial. For instance, the difference is the least, at 27%, in the case of safflower.

In the case of wheat, a major rabi crop which has a good procurement network in parts of north India, the difference between A2FL and C2 costs is 53%. For lentil the difference is 57%.

As is evident, if C2 costs are taken as base, as the Swaminathan Commission had recommended and as the BJP had promised prior to the 2014 elections, the MSP will have had to be substantially higher than what they are in order to be 50% more than the C2 cost.