The MSP hikes are meagre and don’t reflect reality

The minimum support price (MSP) for different crops announced by the Union Government for the 2019-20 marketing season has upset farmers yet again.

There is a yawning gap between the cost of production and the MSPs announced for the year. Forget about the Prof Swaminathan Committee recommendations that call for a price equivalent to cost of production plus 50 per cent; the MSPs have not even covered the inflation increase.

Paddy is case in a point. The cost of the production of paddy in Telangana, according to the State Government, is ₹2,075 a quintal but the MSP announced for this commodity is ₹1,815. In Punjab, the cost of production is ₹2,490 and in Orissa it is ₹2,344.

“The farmer is losing at the farm gate itself. The Union Government is not recognising the averages sent by the States, which are equipped to estimate the cost of production in their respective States,” argues S Malla Reddy, Vice-President of All India Kisan Sabha.

The huge mismatch between the cost of production, CACP’s estimation and the MSP announced by the government is not something new.

Historical data shows these figures have never matched and have always left the farmers in losses.

Flawed method?

Farmers organisations question the very method that the CACP employs to assess the cost of production. The Commission for Agricultural Costs and Prices (CACP), which has been entrusted with the job of enumerating the cost components for different crops, put the cost of cultivation at ₹1,174 a quintal in Punjab, which is less than half of what the State had pegged.

The same is the case with several States. The CACP estimations are far lower than what farmers are incurring to grow the crops. Farmers have every reason to feel annoyed.

The States, which have enumerated the cost of production themselves, must chip in and pay an additional sum in the form of bonus while procuring the produce.

The same is the case with cotton. The MSP announced for this fibre crop is ₹5,255 (medium staple) and ₹5,550, a hike of just ₹105 and ₹100, respectively.

Though the figures look respectable, they are far less than what farmers spend. Soon after a commodity changes hands — going from farmers to traders — the price goes up significantly. It even rules at around ₹7,500.

Farmers feel that there is an urgent need to change the way the cost of production of crops is calculated. It should factor in the realistic price components, covering all the aspects of investments, including the increasing land values and the real labour costs.

Besides increasing the MSPs to reflect original costs, there is a need to improve productivity too. For this, the country should focus on better varieties that can withstand drought, salinity and water logging. Improved yields per acre would mean better incomes for farmers.

Unless and until the anomalies are not corrected and actual cost of production is taken into consideration, the MSPs will continue to disappoint farmers and will continue to suffer losses. Quick fixes like PM-KISAN and Rythu Bandhus can’t bail them out from bigger financial challenges.

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