THE TRIPPLE JUMLAS: THE MSP RHETORIC

In the Union Budget 2018-19, the Finance Minister announced that the government will provide farmers a Minimum Support Price (MSP) that is 50 percent over the cost of production. While the government’s policy was welcomed, the sudden change of heart, at the last lap of its term raised many eyebrows. 

At the peak of campaigning for the 2014 parliamentary elections, the BJP released its Manifesto. A paragraph from page 27 of that manifesto reads as follows:

“Agriculture is the engine of India’s economic growth and the largest employer. The BJP commits highest priority to agricultural growth, increase in farmer’s income and rural development. The BJP will take steps to enhance the profitability in agriculture by ensuring minimum 50 percent profit over the cost of production.”

In that elections the BJP stormed to power winning 282 seats on its own, a first in 30 years. Around nine months after this emphatic victory, on 6^th February 2015, the government filed an affidavit before the Supreme Court in a case titled ‘Consortium of Indian Farmers Association vs Union of India’. Paragraph 4 of that affidavit reads as follows:

“It is reiterated that MSP is recommended by CACP (Commission on Agriculture Costs and Prices] on objective criteria considering a variety of factors. Hence, prescribing an increase of atleast 50% on cost may distort the market. A mechanical linkage between MSP and Cost of Production may be counter-productive in some cases”.

This stand taken by the government in the Supreme Court was a clear U-Turn from its election promise. A sudden change of heart in the last year of its term, probably influenced by the backlash of rural voters in Gujarat, clearly stands out as an election gimmick.

Coming back to the policy aspect, the Finance Minister announced Cost+50% as MSP but he did not define the Cost on which the MSP would be based. A few days back, the Prime Minister spoke at an event listing various costs incurred by the farmer which would be considered while deciding the MSP but he stopped short of answering the crucial question: Will the MSP be A2 cost+50%, or C2 cost+50%?^# The reluctance of the government in answering this question raised questions over its intention, given the fact that it has a record of announcing MSP which at times does not even take inflation into consideration.

In 2013-14, (the last year of the UPA Government) data available with the CACP establish that the MSP ‘promise’ of the NDA Government was already implemented by the UPA Government:

Crop	Increase over Cost of Production (%)
Wheat	106
Gram	75
Lentil	64
Mustard	133
Paddy	36
Bhajra	63
Soya Bean	48
Cotton	61

 

It is a well-known fact that even as the governments announce MSP not all farmers can benefit from it. Many a time, farmers are forced to sell their produce at market price. If this government is passionately committed to the welfare of our farmers, will the Prime Minister promise to pay those farmers the difference between MSP and market price? If he’s ready to do so, will he make a budgetary provision for it? Let’s wait and watch.

*Views are personal

^#A2 cost signifies Input Cost; C2 cost signifies costs such as cost of interest, cost of land rent, etc.