While approving the MSP for various crops, the government continues to leave out important costs.
The government’s decision to alter the terms of references of the Commission on Agricultural Costs and Prices (CACP) to include some more variables in the calculation of Minimum Support Price (MSP) has left the farmers largely dissatisfied. This is because the government has accepted only a few of the several recommendations made in this regard by the high-level committees and commissions on the method of working out the MSP. Many others, which are deemed equally significant, have been disregarded.
The new factors to be considered for MSP computation, approved by the Cabinet Committee on Economic Affairs (CCEA) in its meeting on January 15, include a premium on crop insurance, marketing and transportation costs incurred by the farmers. Among a large number of proposals that have not found the CCEA’s favour are providing statutory status to the CACP and taking interest rates actually paid by farmers on credit into account.
The high-level panels which have commented on agricultural pricing methodology in recent years included the Y K Alagh Committee (report submitted in May 2005), the National Commission on Farmers (NCF) headed by M S Swaminathan (final report in October 2006) and the Parliamentary Standing Committee on Agriculture (report presented in July 2008). Before that, a committee chaired by Abhijit Sen had also gone into the issue.
Most of these panels have suggested that the MSP should be significantly higher than the C2 cost (production cost). The Parliamentary panel and Swaminathan Commission had recommended 50 per cent premium over C2 cost. They argued that the risk element in agriculture was rather high which can be addressed only by keeping the MSP at levels significantly higher than the actual production costs.
Some of the panels went beyond this and recommended other factors also to be kept in mind. The Swaminathan Commission, for instance, wanted the MSP to be treated merely as a ‘minimum remunerative price’ (MRP). The price at which the government procures grains from farmers should be different from the MSP and should be decided by taking into consideration prices that private trade is willing to pay for the produce. The objective should be to ensure that the net take-home income of farmers is comparable to those of civil servants, the commission had opined.
The concept of parity with the government employees was expanded further by the Standing Committee on Agriculture. It said that farmers were not even treated as skilled labour while determining the MSP. Consequently, the standard of living of small and marginal farmers was below that of Group-D government employees (peons).
The committee also found faults with the present practice of averaging costs incurred in different states to arrive at the MSP. This results in loss to wheat and rice growers in states like Punjab, Haryana and Karnataka where per hectare expenditure in raising these crops is relatively far higher than elsewhere — almost twice that in states like Chhattisgarh and Jharkhand.
Similarly, the cost of irrigating crops differs in different states depending on the depth of water table. In Rajasthan, where groundwater is as deep as 400 feet (120 metres), the cost of lifting water turns out to be even higher than that incurred in states like Haryana and Punjab, which also have to cope with the receding water table — already down to more than 80 feet (25 metres).
Where land is concerned, the Parliamentary Committee had noted that CACP takes into account the rent for leased land and not cost of owned land or the interest foregone on this cost. It recommended the latter also to be counted among production costs.
Indeed, regardless of the merits or demerits of the recommendations of these panels, the government needs to realise that the awareness of such issues among farmers is now growing fast and they are seeking remunerative returns for their produce. Some of the farmers’ organisations, notably the Consortium of Indian Farmers Associations, have begun accusing the government of being pro-industry and anti-farmers.
They plead for well-conceived reforms in agricultural policies to ensure that farmers, who have to work day and night in the fields can lead a decent life. They want political parties to state their stand on farmers’ issues in clear terms in their manifestos for the forthcoming general election.
