New Delhi: Amid the row over the three controversial farm laws passed by the Modi government, major kharif crops namely paddy, sorghum, millet, arhar and others are currently being procured across the country.
While the Centre claims that more paddy has been purchased in comparison to last year, farmers and agricultural workers claim that only paddy is being procured among rabi crops, and that too, only in Punjab and Haryana.
Government data also confirms the farmers’ claims. Of the total paddy purchased by the central government this year, about 90% has been procured from Punjab and Haryana.
In the absence of procurement by government agencies, which results in low market prices, farmers are compelled to sell their produce at prices below the Minimum Support Price (MSP).
A comparison between the MSP determined by the Centre and the cost of production across different states renders the situation more alarming as it turns out that the prices fixed by the Centre are considerably less than the production cost in many states.
As a result, several states, including BJP-ruled states, have written to the central government expressing their disapproval of the MSP fixed for the kharif crops of 2020 as inadequate and demanding the prices to be set in accordance with state-wise production cost.
The official correspondence accessed by The Wire has revealed that Jharkhand, Rajasthan, Maharashtra, Karnataka, Bihar, Andhra Pradesh and Odisha have opposed the prices of kharif crops, namely paddy, sorghum, pearl millet, ragi, maize, arhar, moong, urad, groundnut, sunflower, soyabean and cotton, as announced by the Central government and demanded changes in them.
In their respective letters written to the Ministry of Agriculture and Farmers Welfare, the states had demanded to determine the MSP based on the production cost of these crops. However, the Centre turned down all the demands in this regard.
Documents accessed by The Wire reveal that there is a difference of up to Rs 7,800 per quintal in the MSP recommended by the states and the prices declared by the Centre.
It means that a farmer is at risk of incurring a loss of up to Rs 7,800 per quintal when selling the produce on the existing MSP fixed by the Centre, according to the MSP assessment of the state government.
In its letter to the Centre, the Jharkhand government, led by chief minister Hemant Soren, had said that there is a need to increase the MSP to facilitate farmers who have returned to the state in the wake of the coronavirus pandemic, so that their problems can be resolved.
In a letter to Additional Secretary of the Union Ministry of Agriculture, Dolly Chakraborty, state agriculture secretary Aboobacker Siddiqui P. highlighted the difference between the MSP announced by the government of India and the prices proposed by the state government.
In accordance with the state’s recommendations, the Jharkhand government demanded the MSP of paddy be fixed at Rs 2,784 per quintal. The Centre, however, has set the MSP of paddy at Rs 1,868 per quintal for this season.
As such, the MSP of paddy announced by the Centre is Rs 916 less than the price proposed by the Jharkhand government. Jharkhand accounts for 3.3% of the total paddy production in the country.
Similarly, the state government had asked to fix the MSP of maize at Rs 3,526 per quintal. But the Centre announced it at Rs 1,850 per quintal, which is Rs 1,676 less than the state’s recommendation.
Meanwhile, the MSPs of ragi, arhar, moong and urad as announced by the Centre are higher than the prices proposed by the state government.
The Jharkhand government had demanded to set the MSP of groundnut at Rs 7,594 per quintal. But the Centre has fixed it at Rs 5,275 per quintal, that is Rs 2,319 less than the proposed rate.
Similarly, the state had demanded the MSP of Rs 9,037 per quintal for soybean and Rs 11,331 per quintal for sunflower.
The Centre, however, announced the MSP as Rs 3,880 per quintal for soybean and Rs 5,885 per quintal for sunflower.
It turns out to be less than the recommended prices by Rs 5,157 per quintal and Rs 5,446 per quintal respectively.
In a letter dated May 6, 2020, Siddiqui had said, “Agriculture is the backbone of Jharkhand’s economy. About 70 percent of the population depends on agriculture. It may further be noted that, in context of Covid 19, many farmers are returning to the state. In view of this, enhanced MSP will incentivize farmers.”
“State has been facing continuous spell of droughts and farmers are under stress,” the letter added while seeking a hike in the MSP.
“Many farmers in the state have availed crop loans but due to the unfavourable climatic conditions, they are under severe distress to repay the loans,” Siddiqui wrote.
However, the Centre rejected the demands of the Jharkhand government.
The Rajasthan government had written a letter to the Union Ministry of Agriculture arguing that since the cost of cultivation is higher for various crops as compared to other states owing to the fact that a large portion of the state has a desert terrain and arid climatic conditions with little or no rainfall, the MSP of rabi crops in the state should be increased.
In a letter dated May 6, 2020, state chief secretary, D.B. Gupta, demanded a hike in the minimum support prices of millet, maize, soybean and moong.
According to the letter, the Rajasthan government had demanded to increase the MSP of millet to Rs 2,210 per quintal, but the Centre fixed it at Rs 2,150 per quintal instead.
Similarly, the state had asked to fix the MSP of maize at Rs 3,200 per quintal. But the Centre announced it to be Rs 1,850 per quintal, which is Rs 1,350 less than the recommended rates.
In case of soybean, the Rajasthan government had sought an MSP of Rs 4,200 per quintal, while the Centre has fixed it at Rs 3,880 per quintal.
Similarly, the state had asked to increase the rate of moong to Rs 8,470 per quintal, but the Centre announced a much lower rate of Rs 7,196 per quintal.
“Since the state of Rajasthan holds a significant position in the country both in terms of sowing and production of the above-mentioned crops, therefore, the minimum support price proposals recommended by the state should be taken note of in fixing the prices of these crops.
Rajasthan holds the top position in terms of millet production accounting for 48.6% of the total production in the country. Similarly, the state accounts for 7.1% of the country’s total maize production and 9.2% of soybean production.
Rajasthan is also the largest moong producing state in the country, contributing 58.9% to the total moong production of the country.
Documents from the Ministry of Agriculture reveal that the MSP announced by the Centre is up to 53% less than the recommended prices of the Maharashtra government.
The state recommended to raise the MSP of paddy to Rs 3,968 per quintal, that of sorghum to Rs 3,745 per quintal, millet Rs 4,182 per quintal, maize Rs 2,163 per quintal, toor (arhar) Rs 6,211 per quintal, moong Rs 10,444 per quintal, urad Rs 8,900 per quintal, groundnut Rs 9,511 per quintal, soybean Rs 6,070 per quintal and cotton Rs 8,215 per quintal.
However, the MSP of paddy was fixed by the Centre at Rs 1,868 per quintal, that is, 53% less than the state government’s proposed price.
Similarly, as against the MSP recommended by the state, the prices announced by the Centre are less by 30 % for sorghum or jowar, 49 % for millet, 14 % for maize, 3 % for toor, 31 % for moong, 33 % for urad, 45 % for groundnut, 36 % for soyabean and 29 % for cotton.
On comparison of prices, the MSP of paddy turns out to less than the state’s recommended price by Rs 2,300 per quintal.
Similarly, the MSP is less than the state’s recommendation by Rs 1,125 for sorghum, Rs 2,032 for millet, Rs 313 for maize, Rs 211 for toor, Rs 3,248 for moong, Rs 2,900 for urad, Rs 4,236 for groundnut, Rs 2,190 for soybean and Rs 2,390 for cotton per quintal each.
In a letter to the Ministry of Agriculture and Farmers Welfare on May 14, 2020, State Agriculture Secretary Eknath Dawle said, “The cost of farm inputs, including labour cost is higher in Maharashtra state and productivity of most of the field crops is lower in the State due to rainfed farming condition. The MSP recommended by CACP in their report are far lower than that recommended by State Agriculture Price Commission.”
“Farmers in the state are not adequately compensated for their produce. Therefore, GOI may consider the recommendation of the State while finalizing MSP of crops for Kharif season 2020-21,” the letter further read.
The Commission for Agricultural Costs and Prices (CACP) is an agency of the Union Ministry of Agriculture which recommends minimum support prices of seasonal crops every year. In a report submitted for the Kharif season this year, the commission claimed that the state of Maharashtra had not sent any report regarding the cost of cultivation.
However, along with a letter sent to the Ministry of Agriculture, the State Agriculture Secretary has attached a letter issued to the CACP dated March 13, 2020, refuting this claim. The attached letter contains details of production cost of various Kharif crops grown in the state and the MSP recommended for each of them by the state.
In the letter, the state government presented an account of the cost of cultivation of all crops and demanded to fix the MSP based on it.
However, the Centre also rejected all such demands.
The Agriculture Department of the BJP-ruled state of Karnataka clearly stated in its letter to the Centre that the MSP announced for various crops is less than the cost of their cultivation in the state.
This is mainly because of some important variables that are left out by the CACP while calculating the cost, the department said. Therefore, the MSP announced by the government of India is always lower than the cost of cultivation.
The state agriculture commissioner wrote in the letter, “The KACP is regularly commenting on this lacuna of the CACP every year. There is a lot of incisive requests from the farmers of Karnataka to increase the MSP, so that it becomes remunerative.”
In its proposal, the Karnataka government had sought to increase the MSP of paddy to Rs 2,272 per quintal, which is much higher than Rs 1,868 per quintal as fixed by the Centre.
Similarly, the state recommended the MSP for white sorghum (maldandi), millet, ragi, maize, toor, moong, urad, groundnut, sunflower, soybean and cotton to be increased to Rs. 4,671, Rs. 4,932, Rs. 5,698, Rs. 4,704, Rs. 2,025, Rs. 8,999, Rs. 13,881, Rs. 8,395, Rs. 9,613. Rs, 9,293 and Rs 5,665 per quintal each respectively.
Out of these, the MSP prescribed by the Centre for all crops except cotton and toor is much less than the state recommended prices.
The MSP of Urad, for instance, is Rs 7,881 per quintal less than the state’s proposal. It means that on selling a quintal of urad at the MSP fixed by the Centre a farmer is bound to incur a loss of Rs 7,881.
Similarly, the MSP is lower than the suggested prices per quintal by Rs 2,854 for maize, Rs 2,031 for sorghum, Rs 2,403 for ragi, and Rs 3,120.
The Karnataka government has recommended adding 75% of the cost of cultivation to calculate the MSP [cost + (cost x75 / 100)] in order to give remunerative prices to the farmers.
In addition, the state has also suggested to include other factors such as managerial cost, marketing and crop insurance premiums.
The BJP-backed Nitish government of Bihar also expressed disapproval on the MSP set by the Centre and sought to increase it.
In his letter sent on May 22, 2020, State Agriculture Secretary, N. Saravana Kumar had said that keeping in mind the cost of production in the state, the MSP of paddy should be fixed at Rs 2,532 per quintal and that of maize at Rs 2,526 per quintal.
However, the Centre has fixed the MSP of paddy at Rs 1,868 and that of maize at Rs 1,850 per quintal, which is much lower than the Bihar government’s proposal.
Kumar said, “Bihar is one of the important maize producing states and paddy is the main kharif crop of the state. But the farmers sell their produce at low price and do not get proper profit due to non-availability of marketing infrastructure, go-downs and procurement facilities.”
This is probably the first time that the Bihar government has admitted that their procurement system is not appropriate, due to which farmers have to sell their produce at throwaway prices.
A major portion of land in Bihar remains affected by floods for long periods due to which the cost of cultivation surges while production is low.
In the letter, Bihar Agriculture Secretary sought an increase in the MSP to provide remunerative prices to the farmers stating that ”Agriculture production system in Bihar is largely based on human labour, erratic and non-homogenous nature of South-west monsoon, recurrence of frequent flood in Northern Bihar, prolonged rainfed condition in southern Bihar, larger proportion of small and marginal farmers, lower rate of adoption of new technology by farmers and their poor socio-economic conditions.”
However, the Centre rejected the demands made by the state government in this regard.
Similar to the recommendations made by other states, the Andhra Pradesh government had also sought to increase the MSP of kharif crops keeping in mind the increased cost of production. The state had proposed to fix the MSP based on C2 cost rather than A2 + FL cost.
In May 2020, state agriculture commissioner H. Arun Kumar wrote in his letter, “The cost of cultivation increased as the component of labour, cost of inputs increased. Hence, farming became less remunerative when compared to any other sectors due to increased input cost and less availability of farm in agricultural operations. Moreover, frequent losses occurring due to natural calamities also have influence on the net returns.”
“Every year the Minimum Support Price (MSP) for agriculture crops is finalized by Government of India based on recommendation of Commission for Agricultural Costs and Prices (CACP). While fixing the MSP, the Government of India is considering the Model – A2 (Cost of Cultivation and Lease on Land) + Family Labour cost and not as per our request to fix MSP considering Model C2+50% over and above production cost.”
However, the Centre worked out the MSP based on the (A2 + FL) +50 formula, which is much lower than the C2 cost.
Like Andhra Pradesh, the Odisha government had also sought to determine the MSP based on C2 production cost.
Though the MSP announced by the Centre is higher than the MSP proposed by the state government for non-paddy crops, there is a marked difference in the price of paddy.
In a letter written to the Union agriculture ministry dated May 14, 2020, state Additional Secretary Manmath Kumar Pani said, “Odisha being a major paddy growing state and having a robust procurement mechanism, it is felt that its famers would be hardly benefitted out of such marginal increase in MSP for paddy.”
Odisha had suggested to fix the MSP of common grade paddy at Rs 2,930 per quintal, while the Centre announced it as Rs 1,868 per quintal.
In the letter addressed to Dolly Chakraborty, Additional Secretary, Ministry of Agriculture and Farmers Welfare, Pani wrote, “Although the Commission has recommended higher values of MSP for non-paddy crops as compared to the state’s suggestion but for paddy the MSP recommended is far away from that of the State.”
“Moreover, in this context it is pertinent to mention here that based on practical assessment of cost of production and unanimous resolution passed in the State’s Legislative Assembly, it had been suggested to fix the MSP of paddy at Rs. 2,930 per quintal.”
However, the Centre did not accept the proposal.
How does the Centre calculate the MSP?
According to the Swaminathan Commission report, farmers should get 1.5 times the cost of the crops on the basis of C2 cost, which includes all the costs of agriculture such as the cost of fertilizer, water, and seed as well as family labour, rental value of owned land and Interest on fixed capital.
However, the Centre is paying 1.5 times the cost of crops on the basis of A2 + FL, which includes all cash transactions and payments made by the farmer, including the cost of family labour as well as the rental value of the leased land but does not include the rental value of owned land and interest value on fixed capital.
The A2+ FL cost is much lower than the C2 cost. As a result, the MSP calculated against it is significantly less.
Based on the recommendations of the CACP, the central government determines the MSP calculating it against the average cost of crops in all states.
Consequently, while farmers in some states receive a fair price, in several other states the MSP granted to them is not even equal to the cost of cultivation.
The Wire had previously reported how a single minimum support price for crops across the country is disadvantageous for farmers and how state governments, including BJP-ruled states, had demanded the Centre announce state-based minimum support prices for crops.
Translated from the Hindi original by Naushin Rehman.