Farmers, mainly from Haryana, Punjab and western Uttar Pradesh, have gathered in Delhi for the past few days to stage a dharna.
According to the news published in the newspaper, the demands of the farmers are – Minimum Support Price, change in the method of determining MSP and legal backing / guarantee (Legal Backing / Guarantee).
If the agricultural production is more than the market demand, the prices of the agricultural products fall, the farmers face losses, many small farmers are unable to cope with these losses and resort to suicide.
MSP has been in place in India for many years, and the system has been considered very beneficial, especially in rice and wheat. But there are a few aspects of legal assurance on MSP, which need to be considered. Discussing matters as per my opinion, please guide me if I am wrong.
Paddy and wheat are procured through MSP and distributed to the public through ration system. Farmers and people both benefit from it. But the price at which people get rations (currently free) is much lower than the market price, the government has to subsidize a lot of money. The central government presented the budget and showed this subsidy to be about 2 lakh crore rupees.
Currently this MSP is being claimed for other crops as well. The central government's statement is that - MSP can be given for foodgrains but it is difficult to give it for other crops, the government is in discussion with the farmers in this regard. Because paddy and wheat have warehousing, marketing, infrastructure etc., but other crops do not have such facilities. In addition to paddy and wheat, MSP has been announced for 21 other crops but procurement is not done properly.
What factors are considered in determining MSP?
A2 : Farmers' actual cost of producing crops.
A2 + FL : Farmers' actual cost of producing the crop, and the Government of India assumes a price for the work done by the farmer's family during a crop season (from planting seeds to harvesting).
C2 : This includes A2 + FL, along with the rental value of the farmer's land and interest on fixed capital (machinery etc.) used in agriculture. C2 is the economic cost of producing a crop. (Economic Cost - The amount of money being spent on agriculture, if it is spent in any other field, the profit that would have been obtained, is obtained through MSP).
Farmers want MSP fixed at 50% higher than C2 price. For rice, the cost of A2 + FL is 31% higher for C2 and for wheat the difference is 46%.
According to the central government, complying with such demands will be a huge blow to the economy.
MSP is determined based on the average cost for all India. But this cost is not equal in all states. In India, for paddy, the potential A2 + FL cost is Rs 1455 per quintal. In Punjab this cost is 864 rupees per quintal and in West Bengal this cost is 1766 rupees.
So MSP alone cannot turn around the status of farmers and agriculture. States should take appropriate measures to reduce the cost of cultivation. Institutional arrangements also need to be refined.