The Great MSP Hoax

Amidst the usual tiresome fanfare, India’s agriculture minister on Wednesday announced the minimum support prices for six Rabi (winter) crops. These prices will be paid by the government to farmers if it procures any of this produce when they come to the market next year.

As has now become the standard practice for the Modi government, the new MSP rates are being touted as being in excess of 50% of the cost of production. This is a hoax because what the government is taking as ‘cost of production’ is actually not the full cost. It leaves out important components,  like rent and interest and depreciation costs.

The Reality of Wheat MSP

The main Rabi crop is wheat, so let’s unpack the figures for it. The declared MSP is Rs.1,840 per quintal. The cost price is shown as Rs.866 per quintal. So, the government says, it is declaring a 112% margin over and above the cost of production.

What is the reality? The total cost of production is actually about Rs.1,331/quintal, based on an average 6% increase in input costs over last year. So, as per the farmers’ demand of prices at 50% more than total cost, the MSP should be Rs.1,997 per quintal. However, the announced MSP is Rs.1,840 per quintal - a difference of Rs.157 per quintal.

The exact figure of total cost (C2) is unavailable since the government has not yet released (at the time of writing) the Rabi Price Policy Report for 2019-20. It should have been published in July this year as per past practice. So, a projection of 6% increase in cost has been made over last year.

It might be argued that the Modi government is steadily increasing the MSP and nearing the desired level of cost+50%. But that would be wrong, as can be seen from the chart above. They are just maintaining the gap.

It could also be argued that the gap is so small now – just Rs.157 per quintal. But that too would be callous towards the farmers. A back of the envelope calculation shows this: if the forthcoming Rabi crop follows the trend of last year, then about 35 million tonnes of wheat will be procured by the government. The loss to farmers at the rate of Rs.157 per quintal will be a staggering Rs 500 crore!

There is another problem. Only about 32% of the total production of wheat is procured by the government The balance (which would be somewhere around 65 million tonnes) will be sold by farmers in the open market which fetches them prices much below the declared MSP. The losses to the vast majority of farmers are thus being perpetuated even as there is incessant government propaganda about the increase in MSP.

Fooling the People

As some people have bitterly recounted on the Twitter account of the Agriculture Minister, paddy is being sold at Rs.1,300 per quintal in Haryana whereas its MSP was Rs.1,750.

When it comes to other five Rabi crops – barley, gram, masur (lentil), rapeseed & mustard and safflower – the situation is even more dire. The announced MSPs are far below the cost+50% mark, procurement is abysmal and implementation of MSP non-existent. This is recorded in government reports as well as by farmers in all fora. Yet the Minister blithely calculates an astronomical sum as the potential money that farmers will gain by these new MSPs.

A Betrayal: AIKS

The All India Kisan Sabha (AIKS) has called this announcement a “betrayal” of promises made by the Modi government to farmers. In a statement, the AIKS pointed out that increase in the input costs has not taken into account. “Fertiliser prices have risen drastically by about 25 per cent over the year with DAP retailing at about Rs.26,800/tonne when compared to Rs.21,520/tonne last Rabi season. Diesel prices have risen by over 27 per cent over the year resulting in huge increase in irrigation costs. The weightage given to irrigation costs is only 0.13 which is also way below when compared to the ground reality,” the AIKS said.

The farmers organisation has calculated that with a 10% increase in input costs the declared MSP is short of the total cost by as much as Rs.232 per quintal.

It is impossible that the Agriculture Minister is unaware of the low procurement, below par prices and other problems of the MSP regime. It is equally impossible that BJP President Amit Shah, and Chief Ministers like Devendra Fadnavis of Maharashtra are unaware of all this. Yet, since all of them are applauding the deceptive increase and patting each other’s backs – and, of course, praising the visionary leadership of the Prime Minister -- this can only mean that the Modi government and BJP are knowingly trying to fool the people, especially farmers.

Meanwhile, AIKS, along with more than 200 organisations of farmers under the banner of All India Kisan Sangharsh Coordination Committee, will hold a Kisan Mukti March from three corners of Delhi to Parliament from November 28 to 30, 2018, demanding a special session to discuss the agrarian crisis and passing of two Bills for ensuring assured remunerative prices for farmers as well as liberation from debt.