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Ecostani | A national MSP law will be a tribute to MS Swaminathan

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The farmers are once again on the path of confrontation with the Central government. In 2020, they spent a year-long sit-in along Delhi’s borders to protest against the government’s farm laws, which were eventually repealed in 2021. This time, the farmers are seeking a Minimum Support Price (MSP) law that guarantees farmers an assured income, along the lines of a formula devised by agricultural scientist and economist M S Swaminathan, who days ago, was accorded the Bharat Ratna. The formula provided 50% profit on the weighted average of the cost, as recommended by National Commission on Farmers, formed in 2004 under Swaminathan’s chairmanship.

Farmers at the Shambhu border between Haryana and Punjab, as they make their way towards Delhi for the Delhi Chalo protest march.(PTI) PREMIUM
Farmers at the Shambhu border between Haryana and Punjab, as they make their way towards Delhi for the Delhi Chalo protest march.(PTI)

Starting Tuesday, over 200 farm unions from Punjab, Haryana and western Uttar Pradesh are expected to assemble in and around Delhi. The protest comes at the time when farmers in European Union countries are also protesting against rising inputs costs and government proposals that reduce subsidies in the name of sustainable growth.

The government has been claiming that it has implemented the Swaminathan committee’s MSP formula of 50% profit over complete cost of production. As of now, the MSP is applicable only for government procurement for 22 crops varieties, which covers less than 10% of the total agriculture production of the country. The Central government claims that the Union Budget for 2018-19 announced the pre-determined principle to keep MSP at levels of one-and-half times of the cost of production and same policy has been followed since then.

However, farmer unions claim that the present MSP does not cover all costs; the current formula is A2+FL+50% profit, where A2 is actual paid out cost and FL is family labour. A2 includes hired labour, machine labour, seeds, depreciation of farm assets, land revenue, interest of working capital and rent paid for leased-in land. The Swaminthan-led Farmer Commission recommended C2, considered to cover complete cost of production. C2 also includes costs such as interest on value of owned capital assets (excluding land) and rental value of owned land, apart from the costs covered under A2. The C2 formula substantially increases the assured income as it allows value of land and assets to be revised annually. The present MSP regime has its limitations, which the farmer unions want to remove in the proposed MSP law by getting the C2 formula inserted in the law and making MSP law applicable to all procurements including by private players.

Why is the focus on MSP?

In the 1970s, MSP was devised to provide assured income for farm sector that was growing at a healthy rate of close to 3.5% per annum. The MSP policy was brought in to assist India in achieving national goal of food self-sufficiency and to ensure assured income to farmers. Studies have shown that the gains of the green revolution (in terms of income from the farm sector) starting reducing from 1980s as price did not kept pace with the cost of production. With fragmentation of farm land because of division in families and uncertainty in production due to changing weather patterns, the last two decades have witnessed substantial increase in the inputs costs, particularly labour, with farm income rising only at a nominal rate.

As close to 86% of the Indian farmers are from the marginalized sections cultivating less than two hectares of land, the MSP is also a social security regime for more than half of the country’s 1.4 billion people. The provision will guarantee assured prices to protect farmers against market-price fluctuations that could arise due to climate change, lack of market integration and imperfect information dissemination. The MSP is critical for encouraging investment and promoting adoption of modern agricultural practices by farmers. However, the failure of policymakers to recognize the importance of the MSP (due to complacency in official circles based on the perception that there is a food surplus) has led to several deficiencies, such as low level of payments, underestimation of farming costs and a low rate of increase in MSP. All these have combined to make it ineffective as a floor price, which has led to an agrarian crisis of indebtedness and farmer suicides.

Farm economist Devendra Sharma, supported the call for an MSP law as government procurement is decreasing and there is no regulation to ensure that private players buy at MSP or more from farmers. “An MSP law will ensure that the farmers get assured price for their produce from all and would protect them from the market vagaries. The law will help the farmers across the country not just Punjab and Haryana,” he said.

However, critics of such a law claim that it would lead to “common economy mentality” that will kill the private sector participation in the farming. “It would also lead to higher inflation than projected by the Reserve Bank of India and would benefit rich farmers more than the smaller and marginal farmers. If farm sector needs to improve, it can be only through capital investment in the farm through farmer companies,” said economist Gurcharan Das.

The farmers — like any other industry — have the right to assured prices similar to a maximum retail price assures for all products. A guaranteed MSP law would enable farmers to invest in the sector. It would also provide farmers a wider choice of sale through Agriculture Produce Market Committees (APMC) mandis or directly to private companies, thus enabling price stability. The corporate would be assured returns. The time has come for a national MSP law that would be a true tribute to MS Swaminathan, the father of India’s food security. The pitfalls if any, can be removed after the law is implemented.

Chetan Chauhan, national affairs editor, analyses the most important environment story in the country this week. The views expressed are personal.

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