MSP for 14 Kharif crops not in line with Swaminathan standards

In this article, Dr Cheerala Shankar Rao argues that minimum support price for 14 Kharif crops pertaining to the year 2020-21, are not in line with the Swaminathan Commission. He further writes that compared to the pricing policy suggested by the Swaminathan Committee, the now announced crop support prices are about 25 percent lesser.

Hyderabad: The central government has declared that the minimum support price (MSP) for 14 Kharif crops pertaining to the year 2020-21, in order to benefit the farmers.

The Government also claims that the support price is almost more than 50 per cent of the cost of crop production. However, the actual situation seems to be different. For some crops, there was no support price announced at all.

In fact, many financial experts opine that there seems to be no connection at all between the recommendations made by the Swaminathan Commission and MSP being offered by the central government.

The central government has announced minimum support prices for 14 crops for the Kharif period of 2020-21 and it claims that the support price for all crops has been increased from what was provided last year, and which is 50 per cent higher than the cost of production of crops.

The central government hopes that agriculture will be more encouraging for farmers in the country in the coming period.

The now announced support prices are not in line with the Swaminathan Commission's recommendation to add an additional 50 per cent of the total cost of production to the farmer.

Production Costs are the key Elements of farming

The Commission for Agricultural Costs and Prices (CACP) takes into consideration, seven key aspects of farming, before advising the government to arrive at a support price of a particular crop that can be beneficial to the farmer. The most important of them is the cost of production.

In the absence of a proper mechanism for determining the cost of production, the minimum support pricing process will not be able to achieve the desired results. CACP calculates the cost of production of crops in eight ways.

First one is the A1 type of the crop in which the expenses meted out by the farmer to 14 different entities with a goal of harvesting one quintal quantity of the said crop are calculated. The A2 type of crop cost of cultivation is calculated when the cost to lease the land is added to the cost of cultivation of A1 type crop. B1 Cost is arrived at by adding the interest value of owned fixed capital assets (excluding land) to the A1 Cost of Cultivation. cost of production. B2 Cost is calculated by adding the Cost B1 and Rental value of owned land (net of land revenue) and rent paid for leased-in land.

When we add the imputed family labour value to B1 costs, we arrive at C1 and by adding the same to B2, we get the C2 costs. When the minimum value of labour as per the market or lawful prices are added, we get the C2 (Star) cost. We get the C3 production cost when we add ten per cent of the production and management costs to the C2 Cost. C3 production cost is actually the total economic production cost of the farmer's crop.

In industries other than cultivation and farming, the total cost price of a certain product is arrived at based on the C3 production cost itself. Similarly, in the field of agriculture too, it is important that the remunerative price of any product should be determined on the total C3 production cost. Only then will farming be a viable option for the next generation and also be profitable for the farmers with a satisfactory result of their hard work.

Production costs (in addition to the amount due to be paid at the expense of own resources of land, labour, capital cost) maintenance costs put in by the farmer, with the exception of the direct and indirect costs will have a somewhat fair option for the farmer to carry out farming as a livelihood.

Accordingly, in the year 2006, the Swaminathan Commission has determined the minimum support price of crops taking into consideration the C2 production cost with an additional cost of 50% over and above the C2 costs. However, the central government did not comply with this and has only added one's own family labour to the total cost of cultivation, which is the A2 cost. On top of that, a 50 % value-added minimum support price is announced. This results in the farmer losing his or her own land, capital and ownership.

Compared to the pricing policy suggested by the Swaminathan Committee, the now announced crop support prices are about 25 percent lesser. The loss to the farmer is Rs. 633 per quintal of paddy crop, in corn crop it is about Rs. 790, Rs. 559 in jowar crop, in toor dals it almost to the tune of Rs.2,196 per quintal, in urad dals crop it is Rs. 2,355, in the peanut crops it is at Rs. 1,493 and in cotton to the tune of Rs. 1,888.

Due to the low number of procurement models available to calculate crop cultivation costs, and non-inclusion of other costs such as transportation, marketing and excavation, the government- announced support price for the crops is not reflecting the actual crop production costs.

As the government announced same amount of support price equally amongst all the states, the farmers of those states who have put in higher costs of production in their cultivation, are being affected on a large scale as their investment into the cultivation is far higher than the price announced by the government. However, farmers of those states who have invested lesser in the cultivation of their crops are benefitted higher by the government pricing. Hence, an equal support price seems to be not so viable to implement equally amongst all the states.

Problems with implementation

There are also problems with the implementation of the minimum support pricing policy. Only about 30 per cent of farmers in the country are aware of the policy of minimum support price of crops, being implemented by the Government. Also, only about 30 per cent of those who have the policy awareness are coming forward to sell their crop at the government grain collection centres and are benefiting from these policies.

Rice and wheat constitute 80 per cent of the crops along with Sugarcane to some extent, are the only crops being produced by the government under the minimum support pricing scheme. Out of this, 50 per cent of the rice and 75 per cent of the wheat crop is sourced from just three states - Punjab, Haryana and Uttar Pradesh.

Grain procurement is being decentralized at minimum support prices, but it is not implemented at the field level.

Most of the crops from the Telugu states are not taken seriously. Thus, the minimum support pricing system in the country is only good for some crops and some states. Governments should address such issues with integrity.

MSP should be arrived as per the recommendations of the Swaminathan Committee's report. These should be declared at the state level, keeping in view the different local production costs. Other expenses such as transportation and marketing must also be taken into account as per the market pricing of the particular state.

Procurement of all crops in production and decentralization taking into account all the states of the country should be given equal importance in deciding and implementing the government support price.

Farmers should be fully educated on such policies. Then the agriculture sector and farmers will be able to benefit from the MSP of crops declared by the government in the country.

Assurance to the Farmer!

The central government's goal of doubling the income of farmers by 2022 can be realized only when it is able to provide the farmers of all the states with a suitable and advantageous support price. This can further be achieved only by correctly implementing the right minimum support pricing mechanism.

The Union Ministry of Agriculture annually announces minimum support prices for 22 varieties of crops in the country before the start of the farming season, as per the suggestions of the CACP.

The Department of Civil Supplies announces the minimum market price of sugarcane. MSP is the guarantee that the government will buy the crop from the farmer at the stated price regardless of market fluctuations for the crops grown by the farmers - ensuring that the government pays for the farmers' minimum differential income.

This is meant to encourage farmers to cultivate various crops, increase food and other agricultural products, and at least support the government to procure crops at a minimum support price and provide food for the poor through the supply of grains and oils at the counters of civil supplies.