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Mainstream, VOL 61 No 29, July 15, 2023

Denial of Guaranteed Crop MSP is Pushing Farmers to Desperate sale | Soma Marla

Saturday 15 July 2023, by Soma S. Marla


During the first fortnight of June Indian agriculture witnessed three important incidents. Farmers in Kurukshetra waged a two-week long agitation as state refused to buy Sunflower seeds at government announced procurement price (MSP), Union government announced support prices for current Kharif season, and thirdly, the announcement on a current instalment of PM Kisan funds to farmers.

Recent farmers’ agitation started in Kapurtala when the Haryana government declined to buy sunflower seeds from farmers at union government announced a support price (MSP) at Rs 6,400 per quinotol, while the market price per quintal hovered around rs. 4,000 to 4,800. Perturbed by a huge loss of nearly Rs. 2,000, Sunflower growers from Kapurtala, Ambala and neighbouring Punjab resorted to blocking Chandigarh highway and demanded state government to compensate the price loss ( BHaavyantar) and purchase at Rs. 6,400. However, after nearly two weeks of agitation led by united Farmers body SKMU, state government agreed to purchase compensate Rs 1,000 per quintal.

India is facing severe scarcity of vegetable oils and importing them by spending nearly Rs 20,000 crores. To discourage monoculture of rice and wheat and save excessive use of groundwater and stop farm fires government advised farmers to substitute these crops with cultivation of oil seed, millets and pulses. Not only sunflower, but other crops like mustard, soybean, red gram, mangoes and other crop prices are flattened forcing farmers resort to distress sale even less to the cost of cultivation. Farmers are loosing huge sums running in to tens of thousands of crores of rupees due to artificially kept low agricultural commodity prices (at harvest time) arising from wrong calculation of costs of crop cultivation recommended by CACP (Commission on Central Agricultural Costs and Prices functioning under Union ministry of Agriculture and farmers welfare). While the farmer is pushed to distress, all other players in the market, the middle men, whole sale & export traders, supermarket corporate agribusiness value chains are ironically earning super profits. It is even suspected whether the announced prices in the market are kept deliberately low to benefit all other players in the market on the expense of the farmer.

Huge losses

Recent announcement of MSPs for various crops for current Kharif season are very low. From Rice, wheat to Jowar and cotton the average increase of announced MSPs hover between 4 to 8 percent. Despite present government’s loud promises of profitable crop procurement prices and doubling of farmers income, in reality during the period 2014- 22, average annual increase of different crop MSPs oscillated between 4 to 8.1 percent.
While, during former UPA regime (between 2004 to 2013) the annual increase ranged between 7.2 to 11.3 percent. The increase announced in for Kharif 2023 is Rs 2183 per quintal (7.4 % against from Rs 2040 of pervious season), wheat Rs 2,260. Government procurement is limited to paddy and wheat and is only 40 percent (mostly from states of Punjab, M.P, Haryana, UP, Karnataka, Telangana, A.P, West Bengal and Chattisgarh). Crop MSPs announced by Union government ensures to rise the slab and fetch relatively higher prices in open markets. A vast majority of small, tenant farmers sell at harvest time desperately sell their produce at farm gate much below the govt MSPs to millers and middlemen, as they can not pay for transport to reach far off market yards.

Although the Union government says it’s announced prices cover all costs of cultivation, in fact the followed A + F2 (crop cultivation cost plus family labor), it conveniently ignores all other expenses incurred by the farmer. M.S. Swaminathan Farmers Commission recommended a formula ‘ C2 + 50 %’, that covers comprehensive total of cultivation costs with added 50 percent of C2. In two ways the government announced MSPs are wrongly calculated. Firstly, CACP considers as basis not the prices from immediate previous season but from the financial yer 2012-13. The prices of fertilizers (especially DAP and Potash), diesel, pesticides, transport and land preparation costs have nearly increased by 2.5 times during the last 10 years. But the Commission still holds on to old prices thus artificially lowering the cost of cultivation.

Gap between ‘A + FL’ and Swaminathan’s ‘C2 + 50’ percent

Among the Kharif MSP announced for 14 crops by union cabinet this month the average increase for rice, wheat and other crops is around only 7.4 percent. Only sesame and green gram touched 10 percent increase. This year. CACP calculated and recommended the crop MSPs using the formula A + FL (crop cultivation expenses plus family labor). But Dr. Swaminathan Farmers commission suggested the formula C2 + 50 percent of (C2, the total or comprehensive costs of cultivation) includes cost of all crop cultivation expenses, tenancy rent, interest on capital cost of land, tractors, and other investments. While CACP suggested ‘A’ was calculated based on immediate prices of fertilizers, diesel and others from immediate last season but from process of 2012-13. During the ten year period prices have increased nearly 2.5 times. Also whole family (an average of 4 members) toil in the crop season and after attend post harvest operations, working days for two members during the crop season were considered.

The gap between A+ Fl and C2 + 50 % makes a huge difference. For rice (at 2022 input prices ) per quintal MSP should be Rs. 3,340 instead of Rs 2,183 as announced by government. While Varma & Sharma, (2023) using 2012 input prices calculated using C2+ 50 % at nearly Rs. 2,700 per quintal of rice. Thus the total loss incurred by farmers due to faulty calculation of MSP by CACP for rice during the last 5 years alone amounts to Rs 2.40 Lakh crores. For wheat the loss amounts to nearly 58.5 thousand crore rupees. Calculations using crop input costs from immediate previous season the loss alone for rice and wheat totals would be around 4.0 lakh crore rupees per year.

The estimated losses from gap in computation amounts for cotton (Rs 2,089), Bajra ( Rs. 206), Jowar1969), Mong (Rs 2,269) per quintal and not including other crops like mango, groundnut, soybean, maize and others. All this margin amounting to lakhs of crores arising from price imbalance, that is denied to farmer in the market is pocketed by middle men, wholesale grain traders, super market, export corporate agribusiness syndicate. That’s the reason why except a farmer producer all others are earning a big profits.

To mask the above-described loss, present and previous governments doll out regularly nominal and colourful incentives to farmers from time to time. For example recently released instalment of Rs 6,000 to 11 crore farmers under PM Kisan scheme is yet another Jumla. This dole and low MSPs only cover fraction of huge losses incurred by farmers in every crop season. By giving PM Kisan money, the government has totally withdrawn all subsidies on fertilizers, irrigation, electricity, crop insurance, relief upon crop lsses from natural disasters etc.

Legal guarantee of announced MSPs rescues farmers

All India Kisan Sabha, SKMU, and other farmer organizations have been demanding legal guarantees for announced MSPs so as to relieve farmers up to a certain level of distress. As 70 percent of the population lives in villages, It’s only possible by rising rural incomes and expansion of demand to reach 5 trillion dollar economy.

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