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LATEST NEWS UPDATES | With Latest MSP Promise, the False Narrative Surrounding Costs and Farmer Incomes Continues -Ramandeep Singh Mann

With Latest MSP Promise, the False Narrative Surrounding Costs and Farmer Incomes Continues -Ramandeep Singh Mann

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published Published on Feb 12, 2018   modified Modified on Feb 12, 2018
-TheWire.in

The need of the hour is to set up a farmer pay commission, which can fix a minimum assured income of a farmer household.

About halfway during the budget speech – while announcing the government’s plans for dealing with India’s agrarian crisis – finance minister Arun Jaitley made a rather bizarre statement. Apparently, according to Jaitley, the Modi government has already provided more than 50% margin over cost of production for most crops this rabi season.

To further portray and label this budget as pro-farmer, he announced that the government will implement the prime minister’s promise of fixing minimum support price (MSP) at one-and-a-half times the cost of production. The moment I heard this announcement, I remembered a day three years ago (February 21, 2015, to be precise) where the Centre gave an affidavit in the Supreme Court where it stated that the government would not be able to enhance MSP for agricultural produce to be 50% more than the input cost. The affidavit stated that “prescribing an increase of at least 50% on cost may distort the market. A mechanical linkage between MSP and cost of production may be counter-productive in some cases…”

While the initial MSP budget announcement sparked excitement, more realistic assessments soon weighed in. After all, Jaitley’s claim that the government had already provided more than 50% margin over cost of production for most crops this rabi season was an exaggeration at best.

The M.S. Swaminathan committee had recommended fixing MSP at one-and-a-half times the cost of production and the-then prime ministerial candidate Narendra Modi had latched on to this, making it his poll promise in 2014. Swaminathan had mentioned in his report that the MSP be 50% over “costs of cultivation”. Now, while Swaminathan did not clear the air as to which benchmark was used to calculate“costs of cultivation” at that juncture, the annexures of the report make it clear that he used ‘C2 costs’ to calculate net farmer returns.

In agricultural parlance, ‘A2’ is the actual paid out cost (includes all expenses in cash and kind on account of hired labour including human, bullock, machine, seed, insecticides, pesticides, manure, fertilisers, irrigation charges and miscellaneous expense).

‘A2+FL’ is the actual paid out cost plus imputed value of family labour. And ‘C2’ is A2+FL+ the rental value of owned land and interest on owned fixed capital.

Hence, there is no ambiguity that when Modi was wooing the farmers of India in 2014, he was promising 50% profit over C2 costs. However, agriculture minister Radhamohan Singh has now said that “It’s going to be A2 plus FL. Land rental is a myth. Let’s begin first with a 50 percent mark-up on expenses incurred.”

Such statements are a clear indicator that Modi government has cleverly tried to create a false narrative, that the government has indeed walked the talk regarding their poll promise of 2014 by giving 50% profit over “cost of production” to the farmers.

But, then devil lies in the details. Consider the difference between ‘A2 + FL’ and ‘C2’ costs for wheat.

Please click here to read more.

TheWire.in, 8 February, 2018, https://thewire.in/222290/latest-msp-promise-false-narrative-surrounding-costs-farmer-incomes-continues/


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