Farmers are demanding a legal guarantee for MSP (minimum support price) which in simple terms will ensure them a fixed income, provided they are able to harvest a normal crop. This move appears justified. But first, the facts and some background to the demand for MSP.

Let’s go back to the pre-2014 era. The demand for legal guarantee and implementation of Swaminathan committee recommendations started garnering support among the farming community after the 2008 economic crisis as the MSPs’ increase did not seem sufficient at a time when prices of all other commodities were rising.

This is despite the fact that the UPA government raised MSP of wheat by 122 per cent and that of paddy (Grade A) by 132 per cent between 2003-04 and 2013-14. The MSP increase was 62.5 per cent in wheat and 64 per cent in paddy (Grade A) in the current tenure of the NDA government between 2013-14 and 2023-24.

It may be recalled that the demand for implementation of Swaminathan formula started yielding political dividends before the 2014 general election when the BJP promised the same on coming to power. When a similar demand came up before the 2019 elections, the Centre’s top brass announced in October 2018 that MSP would be henceforth fixed at minimum 50 per cent profit over costs. On suggestions of officials, it was agreed to calculate costs on A2+Family Labour formula (which excludes imputed cost of farmer’s own land) at that time.

Calculation of MSP

Meanwhile, farmers’ voices were heard demanding that MSP be calculated on the Swaminathan committee’s formula of C2 costs plus 50 per cent (which includes imputed costs). Some of the MSPs recommended by CACP are already drawn up on the basis of the C2 formula; hence, MSPs of some, and not all, crops will go up, if the demands of the protesters are accepted.

Whether it is 2018 or now, the arguments being trotted out against implementing MSP at 50 per cent over cost are essentially the same. It is argued that the move would lead to high inflation and inflate the financial burden of the government with traders staying away from the market. These have turned out to be exaggerated fears. For the first two or three years after October 2018, farmers complained of receiving less than the MSP. Now, market prices of most crops are ruling above MSP.

As the recent experience shows, the fiscal burden will not be significant because the legal guarantee for the 20 crops is likely to be paid for by the trade. It is another matter if the government wants to keep consumers happy through subsidised food.

The best part about a legal guarantee will be the uniformity in returns across crops. If a Punjab farmer earns similar margins, whether he grows paddy, pulses or oilseeds, why should he stick to paddy? When the focus of the government is on diversification, it becomes imperative for it ensure the final income (profit) of the farmers remains at around the same level across crops.

Why the opposition to this move? It stems from lack of complete information and the impact of fear-mongering. Here is a simple question for those opposed to farmers’ demands — how will they feel if their own salaries are uncertain? If a company is to decide salaries based on its profits and losses on an ongoing basis, will that be acceptable?

Farming cannot be compared with any other manufacturing or service enterprise. India’s land holding is highly fragmented and it is perhaps a conservative estimate that 86 per cent of farmers own less than five hectares of land. They deal with extraordinary variables, not just price. They deserve a ‘salary’ (fixed income but not from treasury) — more than what is given by PM Kisan Samman Nidhi Yojana.

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