MSP and guaranteed procurement are to stabilize prices, it will not be a burden on exchequer: Samyukta Kisan Morcha

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MSP and guaranteed procurement are to stabilize prices, it will not be a burden on exchequer: Samyukta Kisan Morcha

Asks government to make a political choice between companies and farmers

01 March 2024, New Delhi | ANN

Govt of India offers MSP for only 23 crops and does not assure procurement at this price. Mandis exists in Punjab, Haryana, some in MP and UP for wheat and paddy. There is some state procurement of paddy in AP, Telangana, and others. Cotton is variously procured by the CCI. Sugar cane is assured of a price through govt weighment centres and sale to mills. NAFED purchases some pulses.

“Problem is the procurement is not uniform, e.g., the govt procures 70% of its wheat only from Punjab and MP, which amounts to 70% of what Punjab produces and 35% of what MP produces, but only 15% from what UP produces”, it added.

As a result, paddy MSP which was Rs 2183/q in 2023, got purchased by businesses in Bihar and East UP for as low as Rs 1200/q as there is no govt procurement there.

Similarly, wheat MSP for 2023-24 was Rs 2125, and was purchased in several areas at Rs 1800/q. Also, two years back Maize MSP was Rs 1900/q sold at Rs 1100/q.

“This depression in price happens because there is no guaranteed procurement. MSP sets the benchmark and intermediaries linked to Corporate Trading Companies rule the market as farmers have no capacity to hold and store leading to distress sale,” SKM explained.

Incidents of paddy purchased from Bihar being sold in Punjab and Haryana at MSP rate and a gain of about Rs 800 plus per quintal are known. Therefore, the demand for mandis in all states.

Corruption by officials in mandis, extracting Rs 100/q and weighing charges of Rs 40/q is another issue.

 MSP should be calculated as per Swaminathan formula (C2 + 50%):

SKM alleged, BJP is cheating the farmers by going back on its election promise made in 2014 about the MSP for wheat and paddy. But Govt of India is now maliciously arguing that this is not possible.

The MSP for wheat and paddy declared for 2023-24 was Rs 2125/q and Rs 2183/q respectively. This was calculated at A2+FL costs.

A2 is paid up cost, i.e., what the farmer pays for seeds and other inputs including irrigation. FL is the imputed cost of family labour for only 8 days of work per season. C2, or comprehensive costs also includes land rent, depreciation of farm implements including tractors, full labour costs and interest on capital invested. Generally speaking, this will add another around 25-30 % to the costs. At C2 + 50% the declared MSP will go up accordingly, i.e., for wheat Rs 2762/q and for paddy Rs 2838/q.

Both BJP and Congress promised better prices to the people of Chhattisgarh, Rajasthan, Madhya Pradesh, and Telangana during 2023 state elections. BJP promised Rs 3100/q for paddy while the Congress promised Rs 3200/q in Chhattisgarh and for rice Rs 2500 in MP. BJP promised Rs 2700/q for wheat in Rajasthan and MP while the Congress promised Rs 2600/q.

“These promises are near-about farmers’ demand and even more. Clearly the political parties know what the correct MSP should be, but the BJP is deliberately cheating the farmers and fooling the country,” it said.

Will there be burden on exchequer if MSP is given for all crops?

The govt has been blatantly lying to the people if MSP is given for all crops with assured procurement, there will be a burden of around Rs 10 to 17 lac crores. That cost will definitely be very high if the govt becomes the sole trader of all agricultural produce. Govt does not have to buy all crops. What will it do with so much produce? Vast majority of all agricultural commodities are traded in the open market, consumed by companies as inputs or common people.

Almost 70% plus wheat, rice and cereals are sold in the open market, for pulses and oilseeds it is 90% plus and for sugarcane, vegetables, fruits, dairy, poultry, fisheries, it is close to 100%, considering cooperative sector and govt mills as independent enterprises. So, bulk of agri produce is market consumed. MSP guarantee does not mean the government has to purchase all crops.

Role of MSP and guaranteed procurement is to stabilize prices:

If market value rises above MSP, there is no burden on the government. If it falls below MSP, then it is due to low demand and higher supply. Only in such cases the govt has to intervene by buying immediately the excess stocks to the extent that supply comes down below demand, e.g., if total pulses demand is 30 lac tonnes and supply is 35 lac tonnes, govt has to procure only about 7 lac tonnes at MSP to bring up market prices.

Recently, CRISIL put the figure for 23 crops only at Rs 21,000 crores for 2023! In the case of price crash due to market manipulations like future trading, branding, and cartel formation, it is the responsibility of the government to control and restrict such foul practices.

A deserving MSP raises the benchmark price and prevents unscrupulous trading. The main losers will be big traders and Corporates. Obviously, the government has to make a political choice between companies and farmers.

Food Price can be reduced if inputs are made cheap:

Cost of farming is dependent on the cost of inputs, labour, and services. Companies selling seeds, fertilizers, insecticides, pumping sets, tractors / equipment, diesel, and electricity make a windfall by selling at predetermined prices. Govt also charges its highest GST of 28% on farm equipment.

If these costs are reduced both farmers and people will be put to ease and C2+50% value will come down. The government knows this. That is why BJP in 2023 promised a fertilizer subsidy of Rs 18,000 per acre to Telangana farmers and Congress promised Rs 15,000 per acre as well as Rs 12,000 to each landless family.

Cheap food is also intimately linked to food subsidy and PDS welfare. Counting this expenditure of over Rs 2 lac crores as subsidy to farmers is wrong and mischievous. This is a food subsidy to consumers, not farmers. It is driven by both social welfare needs and as much by Corporate need to keep wages low. High food costs will drive up the wages enormously. It is unfair and unfortunate for the government to counter pose its responsibility to provide cheap food to people with farmers’ need for profitable production. It cannot make farmers bear the brunt of keeping food cheap.

SKM has been demanding reduction in input costs, end to GST and free power for farming as well as free 300 units electricity for rural houses and shops, with ban on pre-paid meters.

Positions of Pro-Corporate Economists against MSP:

Govt bodies have argued that only 8.8% farmers benefit from MSP so it should be discontinued. This is like saying that MSP should be abolished because 91.2% farmers don’t benefit from it, i.e. stop all free treatment in hospitals as most people anyway can’t get it.

Similarly, they say MSP is effective only for 2 crops, other farmers are not interested. They are wrong. Today the entire country is demanding MSP for their produce.

They also argue that while cereals are growing at only 1 to 2 % with MSP, the whole milk sector growth is over 5%, fishery over 7% and poultry over 8% without MSP. That does not mean that these sectors are profitable for the farmer. Cereals are grown at huge losses also because there is no alternative to food. These experts have a vision of corporate profiteering in food production.

Govt proposal for Crop Diversification:

Recently govt proposed crop diversification with guaranteed procurement for 5 crops, Urad, Masoor, Arhar, Maize and Cotton with some preconditions. Crop diversification is an important need to save ecology, secure the environment and water level in several areas. That can only be ensured if the government actually guarantees proper MSP for all crops to enable all farmers to earn at an equal level. Govt’s conditional offer and that too for some crops does not solve the problem.

Increasing Farmers Income:

The entire debate on MSP is about increasing farmers income and rejuvenating the Indian markets by increasing the purchasing power of farming people who constitute 50% plus of the purchasers. With rising costs of education, health, transport, and other online services the farmers and their children cannot survive only on agricultural income. At the international expenditure per capita standards of a poverty line of $ 2.15 per person per day (Sept 2022), farmers should earn at least Rs 5,500 per person per month or Rs 27,500 per family.

So, farmers have to be assured some additional income in order to survive. That can only come if through a mechanism of cooperatives and govt. support structure, all farm goods processing, storage, and marketing is done by farmers’ children. This is the main area, “Post Harvest Investments by Companies” as the government is targeting, that MNCs and big corporations are eyeing. Presently it is a market of Rs 30,000 cr per year, expected to grow upto Rs 2.1 lac cr in few years. This market should be protected from private big companies and MNCs. That will decrease the government’s burden on procurement also. Increased income for farmers will certainly rejuvenate Indian markets.

To Sum up, the government must support its farmers by declaring an MSP for all crops at C2+50% and set up procurement centres uniformly all over India. World over all developed countries subsidize their farming. And in India, once the ruling parties are making declarations before elections, they must be held accountable.