Narendra Modi Govt’s MSP For Kharif Season Is Neither Fair Nor Remunerative

The BJP-led union government announced the minimum support prices (MSP) for the Kharif Season 2023-24 on June 7, 2023 claiming that “the move is to ensure remunerative prices to growers for their produce and to encourage crop diversification”. The MSP announced is neither fair nor remunerative; it belies the hopes of the farmers and inflicts huge losses in their incomes. Let alone encouraging crop diversification, it discourages farmers from investing in agriculture.

Rather than doubling farmers’ incomes as claimed by the Prime Minister Narendra Modi, rising input costs coupled with unfair MSP will push large sections of the farmers especially, the small, marginal, middle farmers as well as tenants into indebtedness. The MSP announced yet again for the ninth year in succession betrays the promise of Narendra Modi that MSP will be fixed in accordance with the Swaminathan Commission recommendation of C2+50 per cent, i.e., at least 50 per cent more than the total cost of production.

MSP for paddy has been fixed at Rs 2,183/Qtl, against Rs 2,040/Qtl in the last season, a meagre increase of 7 per cent. MSP of coarse cereals has also been increased by 6.3-7.8 per cent with that of bajra fixed at Rs 2,500/Qtl compared to Rs 2,350/Qtl in 2022-23. For maize, MSP has been raised to Rs 2,090/Qtl against Rs 1,962/Qtl a year ago, an increase of 6.5 per cent. The MSP of tur (arhar or pigeon pea) and urad (black gram) has a meagre increase 6 per cent and 5.3 per cent, an increase of Rs400 to Rs 7,000/Qtl and Rs 350 to Rs 6,950/Qtl. For cotton, there has been an increase of 8.9 per cent, an increase of Rs 540 to Rs 6620/Qtl for medium staple from Rs 6080/Qtl.  MSP of sunflower seed was increased by 5.6 per cent to Rs6760/Qtl, an increase of Rs 60/Qtl. Green gram (moong) MSP was increased by 10.4 per cent over 2022-23, sesamum saw an increase of 10.3 per cent and groundnut an increase of 9 per cent over the last year. The increase is in this range for most crops and since cost projection is based on cost of production estimates from 2019-20 to 2021-22 the MSP fails to compensate for cost increase from 2021-22 to 2023-24.

The BJP government has conveniently shifted goalposts from C2 cost, which measures total cost of cultivation, to A2+FL cost, which does not include rental value of owned land and interest on fixed capital. Moreover, there is a catch even in the prices calculated as per the A2+FL formula. The Commission of Agricultural Costs and Prices (CACP) under-estimates costs for various states, and uses the all India weighted average of these under-estimated costs to compute the MSP. The CACP document Price Policy for Kharif Crops, The Marketing Season 2023-24 confesses that the estimates of cost of production for paddy by Andhra Pradesh, Bihar, Karnataka, Kerala, Maharashtra, Punjab, Tamil Nadu, Telangana and West Bengal are higher than CACP projections. The routine projections done by CACP fail to take into account increasing input costs or factor in the inflation. The Centre did not bother to take even the recommendations of states ruled by the BJP into consideration.

For paddy, the C2 cost projected by the Kerala State Agricultural Department is Rs 2847/Qtl while the CACP projection is only Rs 2338/Qtl. The Punjab state projection of C2 cost for paddy is Rs 2089/Qtl while the CACP projects it as only Rs 1462/Qtl. In most crops, the state projections are much higher than the CACP projections. Knowing fully well that the costs of production are higher in Kerala and the MSP fixed centrally will not meet the costs, the LDF government gives about Rs 800/Qtl bonus for paddy, procuring at Rs 2850/Qtl. The BJP government discourages such initiatives by states claiming that it is market-distorting.

Even if one takes the CACP computation of C2 costs (Rs 1911/Qtl) and applies the C2+50 per cent formula to calculate the MSP of paddy, it should have been Rs 2866/Qtl. The MSP announced is only Rs 2183/Qtl. If the weighted average C2 cost (Rs 2139/Qtl) provided by the State Agricultural Departments is taken into account, C2+50 per cent would have been Rs 3208.5/Qtl. In both cases the MSP announced will be way below and farmers will accrue a loss of Rs 683.5/Qtl and Rs 1025.5/Qtl respectively. A farmer in Andhra Pradesh with a productivity of 6 tonnes/hectare will incur a loss of Rs 41,010/hectare and Rs 61,530/hectare respectively at these costs. This will translate into a loss of anything between Rs 9020 crores to about Rs 13,540 crores per season for farmers of the state (paddy is cultivated in more than 22 lakh hectares in AP).

In case of cotton, the Telangana state C2 projections are Rs 11031/Qtl while the CACP projections are far below at Rs 6264/Qtl that is Rs 4767/Qtl lesser. Even if we take the MSP (Rs 6,620/Qtl) and CACP projection of C2 for cotton (Rs5786/Qtl) the C2+50 price would be Rs 8679/Qtl or a loss of Rs 2059/Qtl. Taking an average production of 15 Qtl/Hectare the losses will be Rs 30,885/hectare. As per the state calculation C2+50 would be Rs 16547/Qtl or Rs 9927/Qtl more than MSP announced. That would mean a loss of Rs 1,48,905/hectare. Given that the state has an acreage of about 19 lakh hectares, the losses at central MSP and state proposed MSP will be ranging from about Rs 5868 crores to Rs 28,291 crores.

One can imagine the huge disincentive to a farmer and the reason why farm suicides are rising in the cotton belt. For arhar/tur, the C2 costs projected by the state of Karnataka is Rs 9588/Qtl while the CACP projection is only Rs 5744/Qtl, that is Rs 3844/Qtl lesser. Inarhar, moong, urad, sunflower, sesamum, nigerseed and cotton, the losses range from around Rs 2000/Qtl to even higher than Rs 3000/Qtl even at the CACP projected C2 rates. Even the MSP fixed is not accruable to farmers in the absence of assured procurement. It is anybody’s guess that the losses suffered by farmers are in thousands of crores. In cotton as well as pulses and oilseeds, faulty trade policy, import at zero duties and so on at the behest of its corporate cronies have further pushed farmers into crisis.

Farmers are first cheated by under-estimating the cost at a level that is much lower than actual ground reality. The farmers in states with higher costs of production are cheated the second time as the weighted average cost will invariably be lower than their actual costs. The third time farmers are cheated since this MSP is mostly notional or on paper as there is no assured procurement in most cases. The procurement as a percentage of total production in 2021-22 was 1.14 per cent for arhar/tur, 5.07 per cent for moong, 0.21 per cent for urad, 2.05 per cent for groundnut and zero per cent for soybean. In 2022-23 according to figures reported as on February 28, 2023 it was zero per cent for arhar/tur, urad and soybean and 6.39 per cent for moong.

Farmers are caught in the pincer of low unfair prices for their produce and ever rising input costs as deregulation has given a free hand to the corporate companies to fix prices without any control by the government. Often the ruse used is that an increase in MSP will increase prices for consumers, but nothing is done to stop profiteering at the expense of farmers and consumers. Undoubtedly, there is a need to increase productivity with better agronomic practices, high yielding varieties and providing quality inputs at affordable, subsidised rates. Dissemination of scientific agronomic practices with strengthened extension services to take scientific developments to farmers is also required.

This, however, is not the priority of Narendra Modi and the BJP government. Inflicting losses on farmers to deliberately push them into indebtedness, pauperise and dispossess them from their land is the direction in which the BJP government is moving. It also serves their purpose of maximising profits and filling the coffers of the corporate companies. The three Farm Acts brought earlier and the amendments to the Electricity Act are all part of the game-plan to squeeze farmers out of cultivation. It is in this context that united struggles to ensure legal guarantee of MSP with assured procurement are relevant and need to be intensified. (IPA Service)