Not high enough? Modi govt hikes minimum support price (MSP) for key rabi crops, but farmers may not be too happy

The government has once again increased the minimum support price (MSP) for key rabi crops, including paddy and mustard, just ahead of polls in states where these two crops are primarily grown.

The MSP hikes timed to assuage farmers from the northern belt, who had marched in large numbers on October 2 to highlight numerous issues plaguing their farms? This seems unlikely. Image Source: Reuters

The government has once again increased the minimum support price (MSP) for key rabi crops, including paddy and mustard, just ahead of polls in states where these two crops are primarily grown. Rajasthan and Madhya Pradesh are slated to go for assembly elections this winter. The government’s own calculations show this latest round of hikes will provide a bounty to farmers, far beyond the promise of a price which is 50% over input costs.

Were the MSP hikes timed to assuage farmers from the northern belt, who had marched in large numbers on October 2 to highlight numerous issues plaguing their farms? This seems unlikely. For one, Cabinet decisions are usually not taken in a day and the MSP decision was taken just a day after the farmers’ agitation was quelled. Two, the agitating farmers have been seeking many more sops besides MSP hikes, so this announcement is unlikely to take the spark out of the agitation just yet.

According to the decision of the Cabinet Committee on Economic Affairs (CCEA), MSP of wheat has been raised by Rs 105 per quintal, safflower by Rs 845 per quintal, barley by Rs 30 per quintal, masur (lentil) by Rs 225 per quintal, gram by Rs 220 per quintal and rapeseed and mustard by Rs 200 per quintal each.

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An official statement said the new prices include “all paid out costs such as those incurred on account of hired human labour, bullock labour/machine labour, rent paid for leased in land, expenses incurred on use of material inputs like seeds, fertilisers, manures, irrigation charges, depreciation on implements and farm buildings, interest on working capital, diesel/electricity for operation of pump sets etc, miscellaneous expenses and imputed value of family labour.”

But Sudhir Panwar, farmer leader and president of Kisan Jagriti Manch, told DNA Money that the new MSPs have not taken into account the increase in all input costs which is why the hikes are merely 2.1% to 6.1% (except for safflower). “In its election manifesto, the BJP had spoken of giving 50% over the comprehensive cost or C2. But what they are giving now is not C2. How will the farmer earn when all input costs are not covered?”

The Committee on Agricultural Costs and Prices (CACP) uses A2 and C2 to denote different costs. A2 includes all expenses paid by farmers such as seeds, fertiliser, manure, chemicals, hired humans, bullocks, irrigation, maintenance cost, etc. It also includes imputed cost of own seed, manure, bullock and machine labour, rent paid for leased land, depreciation of assets and interest on working capital. C2 is calculated by adding to A2, imputed cost of farmers’ own family labour, interest on fixed capital and rental value of own rent.

Analysts from brokerage firm Ambit also pointed out the futility of the latest round of MSP hikes in tackling farmers’ distress. They said for many crops, the MSP increase is lower than the rise in production cost. The MSP of mustard was increased by Rs 200 a quintal, 5% more than 2017-18, to Rs 4,200, while that of chana was increased by Rs 220 a quintal, or by 5%, to Rs 4,620 a quintal. That of masur (red lentil) was raised by Rs 225 a quintal, 5.3% more, and for safflower, it was raised by Rs 845 a quintal, 20.6% more. Barley’s MSP has been raised by Rs 30 a quintal, 2.1% more to Rs 1,440 a quintal.

The agitating farmers, while turning back from the Delhi border and vowing to continue their agitation, are still demanding lower petrol and electricity bills, implementation of the MSP mechanism in line with the Swaminathan Committee’s recommendation of 50% over C2. Also, they are demanding full waiver of all crop loans, changes in Kisan Credit Card norms and directing the National Green Tribunal to lift the ban on the use of diesel vehicles over 10 years old in the National Capital Region, which would affect farmers who use tractors. The government has assured farmers that several of these demands would be addressed and has formed a panel under MoS Agriculture, Gajendra Singh Shekhawat. Will the farmers’ protests stop now?

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Analysts at brokerage Edelweiss noted that the most important crop for MSP purposes is wheat. And that recently, global wheat prices have shot up as the rupee has simultaneously weakened, thus pushing domestic prices higher.

Source: DNA Money

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