Why are farmers disappointed with Rabi MSP announcement?

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Updated: September 09, 2021 8:11 PM

Those who have studied Indian agriculture sector for years and have looked at the way the policies and regulations in the sector have taken shape, also point to some basic definitional issues and the reasons why there is disappointment among farmers.

MSPFarmers feel this increase in MSP is only a nominal increase.

To the agitating farmers in India and to those still talking of goals to double farmers’ income by March 2023, the just announced Minimum Support Prices (MSP) for Rabi crops for marketing season 2022-23 cleared by the Union cabinet on Wednesday seems to come as a disappointment. Instead of instilling hopes of a government that is able to plumb the minds of the farmers, the stated increase in prices are being dismissed as either “nominal” if not completely “notional” and one that will only crimp their scope for higher remuneration.

It is being argued as a case of repressed remuneration and one that is not quite in sync with even the recommendations of the M S Swaminathan committee which had talked of a cost calculation that looked at the total cost of production plus 50 per cent.

Though at a first read, the official note, far from sounding a ho-hum script, talks of  “the increase in MSP for Rabi Crops for the Rabi Marketing Season 2022-23” being “in line with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5 times of the all-India weighted average cost of production, aiming a reasonably fair remuneration for the farmers.”

But then, to those from the farmers’ camp, an unsettling tone in their response seems almost automatic and instinctive.

VM Singh, Convenor Rashtriya Kisan Mazdoor sangathan, tells Financial Express Online: “this increase in MSP is only a nominal increase and arguably only notional in nature as it does not take into account the price inflation across various inputs that a farmer has had to cope with over the past year.”

He says, “just consider only one input – that of diesel – in this so-called calculated comprehensive costs and you will see that the costs are up by as much as 30 per cent over last year whereas the increase in MSP for wheat is only 2 per cent. Therefore, in effect, on diesel alone, the impact on the farmer is Rs 3000 per acre (costs towards both cultivation and irrigation) whereas with the Rs 40 increase announced for wheat means it will fetch the farmer an increased remuneration of only  Rs 800 that too if he is able to manage 20 quintals of wheat production per acre.”

Those who have studied Indian agriculture sector for years and have looked at the way the policies and regulations in the sector have taken shape, also point to some basic definitional issues and the reasons why there is disappointment among farmers.

Sukhpal Singh, Professor and former Chairperson, Centre for Management in Agriculture, IIM, Ahmedabad (IIMA) for instance, says: ‘The MSP for Rabi crops for marketing season 2022-23 seem at variance with the what the farmers have been seeking because the cost of cultivation used though termed ‘comprehensive’ is not technically comprehensive, or as commonly understood in the farming community now or even as per the recommendations of the Swaminathan commission which had mooted 50 per cent over the comprehensive cost which is C2.”

The C2, he explains, “even includes costs that the farmer puts in from his own resources such as own land, which has a market rental value as an opportunity cost. This is not included in the MSP announced as these are based only on the paid-out costs. It is also being argued that technically, comprehensive costs should also include 10 per cent of total cost (C2) as management input by the farmer, which again is not taken into account in the just announced MSP.”

The other point of contention, he says, “would stem from the inflationary impact which would imply a much lower MSP increase or rather decline compared with past year in real terms considering 5 to 6 per cent inflation in the economy.”

Those in the India agriculture space often refer to  August 2017 when the Ashok Dalwai committee submitted its voluminous report on doubling farmers’ income in India by 2022-23 (March 2023). Seen in this context and the on the journey thus far, Kapil Mehan, strategic advisor, agribusiness companies and the former managing director and CEO of Coromandel International, says, “the MSP announcement seems more in the nature of a routine seasonal price revision.” But on the larger goal of doubling of farmers’ income, he finds it rather “unfortunately that there is no measurement of the progress made towards doubling of farmers’ income despite India entering the penultimate year of the originally stated goal.”

There is no progress report available, he says, “to indicate how much progress has been made in the three-and-a-half years either through sample surveys or through aggregate information.” What he also finds sad is that “there is an ongoing agitation by farmers for several months now and a logjam without any fact-based logical discussion on the subject.”

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