MSP hike: Budget 2018 plan different from Narendra Modi’s 2014 pledge, say farmers

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Mumbai: In March 2014, Bharatiya Janata Party’s (BJP) prime ministerial candidate Narendra Modi promised a gathering of farmers at Dabhadi village in Maharashtra’s Wardha district that his party would ensure farmers of crops covered by minimum support price (MSP) get at least 50% profit above the cost of production, over and above MSP.

Nearly four years later, finance minister Arun Jaitley said in his budget speech that the government would make sure farmers are paid 1.5 times the cost of production as part of the MSP for all kharif season crops. Farm activists in Maharashtra’s Vidarbha, long suffering from an agrarian crisis, and agriculture experts are sceptical about the implementation part though. They insist that the budgetary announcement is not what Modi had promised in 2014.

Maharashtra, ruled by a BJP-led alliance since October 2014, has been one of the prominent sites of farm unrest during the Modi regime and the promise of 50% “profit” over and above MSP has come back to haunt the BJP on several occasions, including in early 2017 when a record tur (black pigeon) harvest depressed prices. As reported by Mint, a bulk of tur growers in Vidarbha and Marathwada failed to get even the MSP of Rs5,050 per quintal.

Vidarbha-based farm activist Vijay Jawandhiya said the government was misleading farmers by indulging in wordplay. “Jaitley said in his budget speech that the government had already raised the MSP for rabi crops by 1.5 times the cost of production. But why did he not specify the crops? Also, did Modi say in 2014 that the promise would be honoured in 2018? We do not yet know what the MSP for kharif crops is going to be because Jaitley has not spelt out the formula which the Commission for Agricultural Costs and Prices (CACP) would use to determine the MSP,” Jawandhiya said.

The CACP under the ministry of agriculture determines MSP for some 25 agriculture commodities ahead of the kharif and rabi seasons every year.

A farm sector expert and former CACP member, who did not want to be named, said Modi’s promise in 2014 itself was “flawed”. “Given the kind of radical and reformative campaign he ran in 2014, Modi should have promised dismantling of the MSP structure and establishment of a more dynamic agriculture crop price fixation policy. But that would have been politically incorrect and so he chose to make a populist promise. Now he cannot blame the farmers for identifying this promise with what Dr. Swaminathan recommended,” this expert said.

In October 2006, the National Commission for Farmers under agriculture scientist M.S. Swaminathan in its report recommended that the MSP for crops be fixed “at least 50% more than the weighted average cost of production”. The recommendation found favour with farm groups and created problems for all governments as it left out a big grey area—how to calculate the “weighted average cost of production”.

In 2009, the CACP was given six terms of reference to determine MSP, which chiefly include demand and supply, cost of production, and implications of MSP on consumers. “As these determinants factor in the impact of MSP on consumers, all governments have to strike a balance between the MSP and food inflation. There is little room for bias in favour of farmers or consumers,” said the former CACP member. He said the CACP had three formulae to arrive at the cost of production: A2 which covers all input expenses incurred by the farmers on seeds, fertilisers, labour, power supply, and water; A2+FL which in addition to A2 comprises an imputed value of family labour; and C2 which also factors in the land rentals and interest forgone on owned land and fixed capital assets.

“During the UPA years, the MSP for most crops corresponded to the A2 formula and gave at least 50% increase factoring in the cost of production as determined by this formula. Even the Modi government has maintained this practice and MSP of most crops since 2014 have followed the A2 formula only. But when the farmers say that they want the Swaminathan recommendation implemented, they mean the C2 formula and they thought Modi would give them the C2 MSP,” the expert said.

Jawandhiya said if Modi was giving the MSP as per the A2 formula itself, there was no difference between him and his predecessor Manmohan Singh. “In that very public meeting in Vidarbha, Modi had lampooned the Manmohan Singh regime saying it was for ‘mar jawan, mar kisan’ and promised that he would restore the ‘jai jawan, jai kisan’ regime. But why is Modi then giving the MSP that Manmohan Singh gave?,” Jawandhiya wondered.livemint