New Delhi: Before parliament’s budget session began, President Ram Nath Kovind, in his address to the joint session of parliament on January 31, said that the Centre is working with dedication to provide farmers with prices that are 1.5 times the input costs. He further stated that a steady increase in the minimum support price (MSP) for kharif and rabi crops is a step in this direction. However, the president’s claim does not match the reality of MSP as recorded in official files.
Official documents obtained by The Wire under the Right to Information Act reveal that several state governments, including those of BJP-ruled states, had not agreed to the MSP of crops decided by the Central government and had demanded changes.
According to government records, the Centre is paying 1.5 times the cost of the crops on the basis of A2+ FL instead of paying it on the basis of C2 as recommended by the Swaminathan Commission and demanded by the state governments.
A2 + FL cost includes all cash transactions and payments made by the farmer, including the cost of family labour. It also includes the rental value of the leased land. C2 includes A2 + FL cost as well as rent of owned land and interest on owned capital.
On July 3 last year, the cabinet approved the MSP for kharif crops for 2019-20. As compared to 2018-19, there was a slight increase of 3.7% in the MSP of paddy, 4.9% of jowar, 2.6% of millet, 3.5% of maize, 1.1 % of moong, 1.8% of urad, and 2.0% of cotton.
Under the chairmanship of Prime Minister Narendra Modi, the cabinet approved the MSP of crops based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) of the Union Ministry of Agriculture. However, documents reveal that the governments of Chhattisgarh, Haryana, Maharashtra, Rajasthan, Uttar Pradesh, Puducherry, Tamil Nadu, Odisha and Karnataka opposed this.
In fact, comments from the governments of Tamil Nadu and Karnataka were not included in the cabinet note despite the fact that they were received before the cabinet meeting. A cabinet note is an important document on the basis of which the cabinet decides on any subject.
If all crops falling in the purview of MSP are included, the margin of total profit is only 14% over cost C2. That is, the MSP has been decided by adding only 14% to the cost C2.
Official documents also reveal that due to different cultivation costs of various crops in different states of the country, a single MSP is unable to meet the demands of farmers across different states. As a result, many states have raised objections.
Responding to a letter dated April 22, 2019, sent by the Union agriculture secretary Sanjay Agarwal, the West Bengal government wrote on May 8, 2019 that the CACP had recommended the MSP for paddy at Rs 1,815 per quintal against the Rs 2,100 per quintal proposed by the state based on its assessment.
Citing the state’s calculations, joint secretary of the state agriculture ministry Jitendra Roy wrote, “The Estimated C2 Cost of cultivation of paddy in West Bengal during 2017-18 was Rs 1,751 considering Minimum Wages as declared by the Department of Labour, Govt. of West Bengal. Considering an average increase @9% in cost of various inputs and labour charges, the projected C2 Cost of cultivation of paddy in West Bengal during 2019-20 is Rs 1,909.”
On the basis of this assessment, the West Bengal government had requested the Centre to increase the MSP of paddy to Rs 2,100 per quintal instead of Rs 1,815 per quintal. However, the government did not accept the state’s recommendation.
Similarly, the Chhattisgarh government had also demanded that the Centre increase the MSP, in its letter dated May 3, 2019. In the three-page letter, the state agriculture department had calculated the cost of major kharif crops in detail and asked for an increase in the MSP.
Incorporating several aspects in the cost such as cost of labour, interest on land, rent of leased land, expenditure on guarding, and expenditure on transportation, the state government recommended an increase in the MSP of paddy, ragi, maize, arhar, moong, urad, groundnut, soybean, sunflower and sesame to Rs 2,500, Rs 3,100, Rs 1,800, Rs 6,800, Rs 7,300, Rs 6,800, Rs 5,800, Rs 3,800, Rs 6,500 and Rs 6,500 per quintal respectively.
Contrary to the demand of the state, the Centre has fixed the MSP at significantly lower rates for the above mentioned crops, that is, Rs 1,815, Rs 3,150, Rs 1,760, Rs 5,800, Rs 7,050, Rs 5,700, Rs 5,090, Rs 3,710, Rs 6,485 and Rs 6,485 per quintal respectively.
On the MSP recommended by the CACP, the government of Chhattisgarh wrote “The price recommended by the Commission is much lower for different crops as compared to the proposal of the Government of Chhattisgarh. Therefore, in crops where the MSP is less than the proposal sent by the state government, take necessary action to determine the MSP as proposed by the state government in column no. 3.”
After the Centre rejected the MSP as proposed by the state, the Chhattisgarh government demanded a bonus on paddy. However, the Centre viciously opposed it saying, that if the Chhattisgarh government offered a bonus on paddy, the Centre would not buy it.
The former BJP-Shiv Sena government of Maharashtra led by Devendra Fadnavis had also raised objections against the MSP of Kharif crops as decided by the Centre.
On May 17, 2019, the secretary of the state agriculture department Eknath Davle sent a letter demanding an increase in the MSP, in which he wrote, “On March 29, 2019, the state government sent a letter with recommendation and proposal on the MSP. But the MSP fixed for kharif crops by the CACP is much lower than those proposed by the state government.”
The letter further added, “Therefore, you are requested to consider the earlier proposal sent by the Maharashtra government and increase the MSP for kharif crops.”
The then-Fadnavis government had recommended that the MSP of paddy, jowar, millet, maize, arhar, moong, urad, groundnut, soybean, sunflower and cotton be increased to Rs 3,921, Rs 3,628, Rs 4,002, Rs 2,001, Rs 6,161, Rs 9,943, Rs 8,556, Rs 9,416, Rs 5,755, Rs 7,534 and Rs 7,664 per quintal respectively. This amount was much higher than the MSP decided upon by the Centre.
Meanwhile, the Centre had already warned that no state would offer bonus on the MSP that has been fixed as it would lead to market distortion.
On similar lines, Haryana, another BJP-ruled state, also demanded an increase in the MSP for kharif crops. The state said that the MSP recommended was not even equal to the cost of cultivation.
After examining the CACP report, the state agriculture department said in its letter, sent on May 18, 2019, “It is pertinent to mention that the price of diesel, pesticide, fertiliser, machines and other inputs has increased this year as compared to the previous year. Lower availability of labour is also a major contributor in increasing the cost of cultivation.”
The letter further stated, “The proposed pries by CACP are too less compared to increased cost of cultivation in the State of Haryana. Haryana is the major producer of rice in the country. CACP recommended the MSP of two varieties of paddy at Rs 1815 and 1835 per quintal for the year 2019-20 which is only Rs 65 per quintal increase from last year MSP.”
The Department of Agriculture and Farmers Welfare, Haryana, rejected the MSP recommended by the CACP and said that it was not in line with the increase in the cost of cultivation. The Khattar government had demanded that the Centre fix the MSP of paddy at Rs 2,677 per quintal instead of Rs 1,815 per quintal.
In its two-page letter, the Haryana government said, “MSP recommended by CACP is not commensurate with the enhanced cost of production on account of rise in input cost in the state. Therefore, the MSP of paddy should be at least to Rs 2,650-2,750 per quintal in the best interest of the farmers of the State of Haryana.”
Describing the distressing economic situation of farmers in rain-fed areas, the Haryana government wrote that bajra is the main crop using less water and is better suited for such areas but the MSP fixed by the Centre for millet is quite less.
The letter stated, “Department of Agriculture and Farmers Welfare has estimated the input cost for the crop as Rs 2,170, but the CACP has recommended Rs 2,000 per quintal as the MSP. Thus, the recommendation for MSP of Bajra from the state is that it should be Rs 2,200 per quintal.”
However, the government did not increase the MSP for millet.
It is the same for maize. The state government wrote in its letter, “This crop is an important cereal crop and fodder crop yet its area and production have steadily decreased due to low MSP.
It is noteworthy that states like Haryana and Punjab are currently facing a terrible water crisis due to rampant cultivation of paddy. Therefore, the state government is focusing on crops other than paddy which require a lesser amount of water.
Offering the suggestion that maize cultivation may be used in the direction of water conservation, the state government said, “Maize requires lesser quantity of water as compared to Paddy and its cultivation should be encouraged on the grounds of water conservation and crop diversification.”
The letter stated, “The state government is making strong efforts for diversification of Paddy to Maize crop, therefore, we need strong support for increasing the MSP of this crop for adoption by the farmers.”
However, according to the state, the MSP recommended by the Centre does not even cover the cost of cultivation.
The state said, “CACP has recommended Rs 1,760 per quintal which is very less and does not even cover the cost of cultivation. The MSP of Maize should be fixed at Rs 2,350 per quintal.”
Citing a rise in the cost of production due to increased pest attacks, the Khattar government asked the Centre to fix the MSP of cotton at Rs 7,000 per quintal instead of Rs 5,255. MSP for the cotton crop is not adequate to cover the costs, the letter said.
In addition, the Haryana government proposed that the MSP of other crops like Arhar, Moong, Urad, and Groundnut may be fixed at Rs 7850, Rs 9500, Rs 7400 and Rs 6600 per quintal respectively.
Responding to a letter dated April 22, 2019, sent by the agriculture ministry regarding MSP fixed by the Centre, the Rajasthan government issued a letter on May 13, 2019 expressing its disapproval of the MSP recommended by the CACP and demanded to raise it citing the increased cost of cultivation in the state.
The state government wrote in its missive, “Due to most part of the state being a desert region and owing to adverse rainfall conditions, the cost of crop cultivation is higher as compared to other states.”
As a result, the Rajasthan government demanded an increase in the purchase price of millet, maize, soybean, urad and moong. The state government recommended that the MSP of millet should be fixed at Rs 2,200 per quintal instead of Rs 2,000 per quintal as fixed by the government of India.
In addition, the state demanded an increase in the MSP of maize (from Rs 1,760 to Rs 2,650 per quintal), soybean (from Rs 3,710 to Rs 4,500 per quintal), Urad (from Rs 5,700 to Rs 6,200 per quintal) and Moong (from Rs 7,050 to Rs 8,601 per quintal).
In a letter addressed to the Union agriculture secretary Sanjay Agarwal, Rajasthan chief secretary DB Gupta wrote, “Since the state of Rajasthan has an important place in the country in terms of both sowing and cultivation of these crops, kindly do the needful in giving priority and importance to the MSP proposal sent by the state in determining the minimum support price of these crops.”
However, the Centre did not accept the demands made by the state.
The Yogi Adityanath government of Uttar Pradesh also disapproved of the MSP of kharif crops proposed by the Centre for 2019-20 season recommending the MSP be fixed according to the cost of production of the state. This was revealed by a 12-page confidential letter issued by the UP government obtained by The Wire.
In its letter to the Ministry of Agriculture, the state government said, “The main basis for determining the minimum support price of crops is their cultivation cost. The cultivation cost of crops depends on expenditure incurred on human labour, animal labour, machine labour, land rent and agricultural investment, etc. used in cultivation.”
The UP government had demanded an increase in the MSP citing the reason that since the state had a large number of small and marginal farmers, the size of land holdings was very small and the farmers were unable to fully utilise resources and agricultural investments.
According to the state government, there are 92.81% small and marginal farmers in Uttar Pradesh. The size of land holdings was merely 0.73 hectares and for marginal farmers, it was only 0.38 hectares.
Documents obtained by The Wire reveal that there is a huge difference in the CACP and the UP government’s estimation of cost of cultivation owing to which the state government had sought an increase in the MSP.
The Uttar Pradesh government carried out an estimation of the cost of cultivation under Director of Agricultural Statistics and Crop Insurance, along with agricultural economists of agricultural universities. The state had included many aspects in the cost of cultivation such as human labour, machine labour, cost of medicines, insurance premium, rent of land, as well as interest.
Based on this, the state assessed the Cultivation Cost (C2) of paddy to be Rs 1,679 per quintal and recommended the MSP to be Rs 2,520 per quintal. However, the Centre assessed C2 of paddy at Rs 1,619 per quintal and fixed the MSP at Rs 1,815 per quintal only.
The cost of cultivation projected by CACP for other crops is higher as compared to that of the Uttar Pradesh government. But the MSP proposed by CACP is much lower than the state government proposed prices. The reason is that CACP has fixed the MSP on the basis of A2 + FL (which is much lower than C2) instead of C2.
The UP government had recommended to set the MSP at Rs 2,265, Rs 2,225, Rs 6,225, Rs 6,375, Rs 5,855, Rs 5,390, Rs 4,245 and Rs 6,660 per quintal for bajra, maize, urad, moong, arhar, groundnut, soybean and sesame respectively.
However, the Centre rejected the recommendations of the state.
The state government wrote, “Keeping in mind that the majority of the state’s population is dependent on agriculture and related activities, the minimum support price should be announced as per the cost estimated by the state agriculture department so that the farmers can get remunerative prices for their crops and the migration of farmers from agricultural region can be curtailed.”
The Tamil Nadu government said that the proposed MSP of kharif crops for 2019-20 season was not adequate to fulfil the needs of the farmers.
In a letter dated June 24, 2019, the state government reasoned, “Factors such as annual rainfall, water availability, release of water from dams and fluctuation in its cost, and perennial rivers ceasing to flow play a crucial role in determining cultivation cost.”
The state further wrote, “With regard to pulses, low production and higher minimum support price of other food grains has pushed the cultivation of pulses to the margin. Therefore, the production of pulses can be encouraged by increasing their MSP.”
The Tamil Nadu government said: “The cost of production alone does not determine the minimum support price. Factors like social and economic condition of farmers should also be kept in mind so that the farmers can be given a dignified life.”
On this basis, the state government recommended the MSP as Rs 2,700, Rs 2,750, Rs 2,150, Rs 3,150, Rs 2,100, Rs 6,300, Rs 7,700, Rs 6,200, Rs 5,400 and Rs 6,200 for paddy, jowar, bajra, ragi, maize, tuar (arhar), moong, urad, groundnut and cotton respectively.
In addition, the state government had demanded that the MSP of Extra Long Staple (ELS) cotton be fixed between Rs 9,000 to Rs 10,000 per quintal. The state government said that there is a need to set a separate minimum support price of ELS cotton so that cotton farmers may be encouraged to grow the crop.
However, the Centre did not accept the state’s recommendations.
Expressing disapproval over the MSP recommended by the Centre, the Odisha government said that the CACP’s report revealed that the government’s price recommendations were based on A2 + FL cost whereas the state had suggested doing so on the basis of C2 cost which is a better representation of the cost of production.
In a confidential letter sent on July 1, 2019, the state government said, “Odisha being a major paddy growing state and having a robust procurement mechanism it is felt that its farmers would be hardly benefitted out of such marginal increase in MSP for Paddy.”
Based on practical assessment of the cost of production in the state, the Odisha government recommended that the MSP for paddy be fixed at Rs 2,930 per quintal. Similarly, for maize, ragi, arhar, moong, urad, groundnut and sunflower, the following prices were recommended: Rs 1,800, Rs 3,000, Rs 5,900, Rs 7,400, Rs 5,850, Rs 5,140, and Rs 5,500 per quintal respectively. For cotton, the MSP was recommended at Rs 5,350 and Rs 5,650 per quintal.
The Centre, however, ignored the recommendations.
In a letter dated June 29, 2019, the then-Karnataka government advised the Centre to fix the MSP at one and a half times of C2 based on the recommendation of Swaminathan Commission and rejected the MSP decided by the Centre.
On the basis of information collected online from farmers by the Karnataka Agriculture Price Commission (KAPC) since 2016, the state government said that the cultivation cost assessed by them was much lower than the cost estimated by CACP.
The state government said, “The MSP fixed for the 2019-20 season is inadequate compared to the state’s cultivation cost. Because of this, the profit margin of the farmers is either little or negative.”
Comparing the cultivation cost and MSP, the state wrote that in case of arhar the MSP is not even equal to A1 + FL cost, due to which farmers do not seem to benefit at all.
Since, leasing land is not legally approved in Karnataka, A1 and A2 costs are the same.
The Karnataka government wrote, “If the C2 cost assessed by KAPC is included then the profit margin for crops other than maize and moong will become negative. Considering the implementation of one MSP across the country, if C2 cost is counted instead of A1 + FL cost, it would solve the problem of inequality in cultivation cost in all states of India.”
Keeping these aspects in mind, the state government said that considering the cost of cultivation of the state, a bonus should be given to the state government over the proposed MSP to compensate the farmers. The letter further read, “Therefore, the CACP’s assertion that giving bonuses causes distortion in the market should be reconsidered.”
Besides, the state government in its 10-page letter also suggested other solutions for problems related to agriculture. However, the Centre did not accept the recommendations of the state. As a result, the state government announced in December last year that they would give a bonus of Rs 300 per quintal on the MSP of Arhar.
According to the data presented in the Lok Sabha recently by the Ministry of Consumer Affairs, Food and Public Distribution, the Food Corporation of India (FCI) has purchased a total of 333.42 lakh metric tonnes of rice and 341.32 lakh metric tonnes of wheat across the country till 30 January 2020.
Translated from Hindi by Naushin Rehman. You can read the Hindi version here.