We have already discussed why govt cannot give an MSP in written format and ensure nay protect the MSP, in recent development by the Central Government it has hiked the Minimum Support Price (MSP) for Paddy, Pulses and Oilseeds (for all mandated Kharif Crops), the longing effect of which are already discussed in our previous article named as “entangled in the MSP Conundrum”, here we would further elaborate how the price is determined and what are the ways we can make things more smooth or say frictionless between the state and the farmers (farmers union).
Who decides the price?
The commission for Agriculture cost and prices recommends MSP for more than 22 mandated crops and fail remunerative price (FRP) for Sugarcane, the price is determined based on various factors viz, supply and demand for the commodity, market price trend, parity with other crops, inflation, environmental factors, terms of trade between agriculture and non-agricultural sectors (industrial sectors) etc.
There are mainly 3 kinds of production costs given by CACP (Commission of Agriculture, Costs and Prices).
A2 covers all paid-out costs directly incurred by the farmer in cash and kind on seeds, fertilizers, pesticides, hired labour, leased-in land, and fuel. Irrigation, etc, there are many more factors associated, and these factors are not static, hence they need to be revised every year.
A2+FL includes A2 and the imputed value of unpaid family labour. Currently, the government gives A2+FL and gets 50% more on it when the MSP of a crop is determined.
C2 this is more comprehensive as it accounts for rentals and interests forgone on owned land and fixed capital assets on top of A2+FL, which means this accounts for the previous cost as well as the lost opportunity one could get if he/she would not have used his land and monetary resources to grow a crop. With this formula, the cost becomes very large, which may burden the government.
Also, this is the main contention of the whole issue of the farming bill, the farmers union is not only demanding for assurance on MSP but also demands that the C2 formulae should be the basis of determining the MSP of any crop (or the crop for which MSP is given), while many states would gain from this, the states which are not capable of growing these farms will be at disadvantage and also we need to understand that this burden that the state will have to incurred will be taken back from us in the form of direct and indirect taxes.
Aftereffects
While many of the after effects are discussed in the previous article on this blog, it is more problems waiting for us apart from environmental imbalancing effects of the MSP, which are.
With use of modern technologies like tractors and water pumps which run on fuel, and since we know that the cost of fuel has gone up the MSP will be felt lower as the production cost has also gone up and various factors have hiked in the MSP with this there will be deep effect on the MSP as well and then a vicious cycle will start, counting hike in prices will raise MSP and raise in MSP will be taken back from Taxes levied on fuel and other places.
Absence of guaranteed or assured procurement will push the farmer in a difficult position as the product will be high in the market as a result of this abundance the demand will fall down and hence the prices will also fall, now as govt cannot buy all the crop this will make things difficult for the farmer as well.
Solutions
The CACP in its price policy report for the 2018-19 kharif marketing season, had suggested enactment of a legislation conferring on farmers ‘the right to sell at MSP’ and this is felt necessary to instil confidence among the farmers for procurement of their products, which implies that the govt makes it mandatory that the crops shall be sold at the govt recommended MSP and not less than the threshold set by GOI.
The right way to do it is by freezing the MSPs of paddy and wheat, besides capping their procurement at, say, 10-15 quintals per acre per farmer.
Efforts by other players
Many privet players and NGO are coming forward to help farmers have a good and study income and one such organisation is Isha Foundation by Sadhguru, it is important to mention this organisation as there is tremendous work by starting Farmer-producer organisations which bring farmers together allowing them to make a joint agriculture effort and thereby avoiding the pitfalls that lie before an individual farmer and those small holdings. By creating such private entities and consortia, they are free from the local APMC mandis. Under the Companies Act 2013, these companies are registered as private limited who are not bound to sell their product to any mandi in particular, and hence they can now export their produce to far-off places and earn a good margin.
Isha has also been working with several other NGOs such as National Agriculturist Awareness Movement (NAAM), a national organization working to revive the farming community; Low External Input and Sustainable Agriculture (LEISA), a worldwide organization working for the promotion of organic farming; and The Tamil Nadu Organic Farmers Movement founded by Dr Nammazhvar, an agricultural scientist and expert in agroforestry, to create awareness among farmers for better agriculture practices and methods.
Sources:
The Hindu
The Economic Times
Indian express
Theishaoutreach.org
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