Even as farmer unions are aggressively seeking minimum support price (MSP) as per the recommendation of the Swaminathan Commission, the Union Government has on several occasions claimed to be abiding by its suggestions.
The concerns raised by farmers “mainly related to (a) continuance of the minimum support price (MSP)—procurement system, (b) legalising MSP, and (c) vulnerability of small and marginal farmers vis-à-vis the large private players,” wrote CSC Sekhar of Delhi’s Institute of Economic Growth in Economic and Political Weekly last year. According to him the three issues mentioned are interlinked.
Back in December 2018, then Minister of State for Ministry of Agriculture and Farmers Welfare, Parshottam Rupala, assured, “National Commission on Farmers headed by Dr M S Swaminathan submitted its report in 2006. One of the recommendations of the Commission was that MSP should be at least 50% more than the weighted average cost of production. This recommendation was not incorporated in the National policy for Farmers 2007. However, recently Government has increased the MSP for all kharif and rabi crops and other commercial crops for the season 2018-19 with a return of at least 50% over cost of production, which was a historic decision by the Government.”
But it turns out the former agriculture minister didn’t walk the talk. Farmer leader and founder member of the Shetkari Sanghatana, Vijay Jawandhia, wonders why the government is not implementing Swaminathan report in totality.
“The Swaminathan Commission Report submitted to the Centre recommended raising the MSP to at least 50% above the weighted average cost of production. The C2 + 50% formula includes the input cost of capital and the land rent to ensure farmers 50% returns. Even after two decades, no government has recommended the Swaminathan Commission in letter and spirit in totality,” Jawandhia said in an interview to the Indian Express on October 2.
In order to calculate a farmer’s input cost, three kinds of prices are considered. “A2” for all paid-out costs directly incurred by a grower in cash and kind. These include money spent on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc. “FL” stands for an imputed value of unpaid family labour which is added to “A2”. Then, there is “C2” which is a comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets. This formula is different from the “A2+FL” cost.
Against government claims, farmers insist that the official formula lowers MSP significantly. Most farmer leaders have sought the inclusion of C2 cost as they claim is recommended by the Swaminathan Commission.
Thus, no MSP debate can possibly be held today without reference to the Swaminathan Commission. MSP is the price fixed by the government for 22 mandated crops along with the fair and remunerative price (FRP) for sugarcane. This is aimed at assuring farmers of a minimum cost of their produce if the open market prices are less than input cost.
Such remunerative prices, among other recommendations, were part of the reports of the National Commission on Farmers (NCF), chaired by Swaminathan. The Commission submitted five reports between December 2004 and October 2006. The celebrated scientist breathed his last on September 28, aged 98.
Incidentally, the Commission for Agricultural Costs and Prices (CACP), an attached office of the Ministry of Agriculture and Farmers Welfare, is mandated to recommend MSP.
Inclusion of crops under MSP framework is dependent on several factors which include relatively large shelf life, non- perishable, widely grown, item of mass consumption, essential for food security, among others, according to a Lok Sabha answer from Minister of Agriculture and Farmers Welfare, Narendra Singh Tomar, on August 8.
“While recommending MSP, CACP considers important factors like overall demand-supply conditions, cost of production, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors, the likely effect on the rest of the economy, besides ensuring rational utilisation of land, water and other production resources and a minimum of 50 per cent as the margin over cost of production,” he had stated in Lok Sabha on July 25.
According to him, NCF recommended that MSP should be at least 50% more than the weighted average cost of production. “To give effect to this recommendation, Government, in its Union Budget for 2018-19, had made an announcement to keep MSP at a level of one and half times of the cost of production as a pre-determined principle,” he added.
While this disagreement continues between the government and farmer unions, the latter have sought a guarantee on MSP through legislation. Not all states follow the MSP system.
“The concern about the continuance of the MSP procurement system is widespread in Punjab and Haryana because this system has been the lifeline for these states for a long time. The dependence of farmers in these states on the MSP procurement system is far greater than the farmers in any other state”, wrote Sekhar.
Agriculture being a state subject, states like Bihar discontinued the process, while some like Odisha offered support price over that announced by the Cabinet Committee on Economic Affairs (CCEA) from time to time as per CCPA recommendations.
The RSS-affiliated Bharatiya Kisan Sangh has on several occasions pointed out that MSP covers just about 10% of total farmers, given the few states that follow it and the number of crops it covers.
Moreover, farmers argue that MSP does not reflect actual market conditions and the inflationary trends. On June 7, 2023, the government announced an increase in MSP of kharif crops for the marketing season 2023-24. Paddy prices were hiked to ₹2,183 per quintal for this year, against ₹2,040 earlier.
Farmers claim that the extra ₹143 does not suffice in making profits after covering their cost of production. The unpredictable rainfall during monsoon too has added to their woes, they add.
Under pressure to address the issue, the government constituted a committee in July 2022 to make suggestions to make MSP “more effective and transparent, to promote natural farming; to change crop patterns keeping in mind the changing needs of the country.”
Members of the committee have given indications that while some issues have been amicably solved, they are yet to settle the dispute over MSP.