There has been a perpetual tendency with the prime minister that he promises but always falters on that, I understand, promising something is much easier than having the capacity to deliver. I will like to tell you some of the promises in the Agricultural sector which has not been fulfilled till today. This government promised on the price stabilisation fund to help regulate price volatility of important agro-horticultural commodities such as onion, potatoes and pulses and it was set up in 2014-15 but it is ineffective till this day. The second most important issue was establishment of National Agriculture Market for electronic trading and connecting the existing Agriculture Produce Marketing Committees and other market yards to create a unified national market for agricultural commodities. This was also set up in 2016 but largely non-functional since then. The third promise was 50% profits for farmers over cost of production but now the government has started to say it is not possible. The next promise was to unbundle Food Corporation of India (FCI) operations into procurement, storage and distribution for greater efficiency but not much headway was made in this regard. A high-level committee headed by former food minister and senior BJP leader Shanta Kumar, was formed to look into the issue but the committee had junked the idea in its report in 2015. This reality of agrarian crisis has to be understood in right perspective and it has to reckon with in the current kharif marketing season itself, even as it has announced a fresh round of minimum support price (MSP) increases for the about-to-be-planted rabi crops.Farmers have already started bringing their freshly-harvested kharif crops of moong (green gram), urad (black gram), bajra (pigeon-pea) and short-duration paddy varieties, besides early pickings of cotton, into the mandis. Peak arrivals will happen, though, only after next month. But even before that, almost all kharif crops are selling at well below their declared MSPs as is shown in the following table


SOURCE: Ministry of Agriculture 2018
Take, for instance, bajra. This coarse grain is quoting in major markets across poll-bound Rajasthan at Rs 1,250-1,350 per quintal, as against the MSP of Rs 1,950 announced by the Modi government. Jowar, likewise, is trading in Jalgaon, Latur, Sholapur and other centres of Maharashtra at Rs 1,200-1,400 per quintal. Its MSP was handsomely raised from Rs 1,700 per quintal in 2017-18 to Rs 2,430 for this season, just as that of bajra was, from Rs 1,425 to Rs 1,950. Even more revealing is ragi or finger-millet. This crop’s MSP was hiked by 52.5 per cent, from Rs 1,900 to Rs 2,897 per quintal. But its current average modal price at Davangere and the Nagamangala market of Karnataka’s Mandya district according to data from the Union Agriculture Ministry’s own portal is in the Rs 2,100-2,200 range. In the case of kharif pulses arhar (pigeon-pea), moong and urad the ruling market rates are below not only their latest, but even the 2017-18 and 2016-17 MSPs of Rs 5,450 and Rs 5,050/quintal, Rs 5,575 and Rs 5,225/quintal, and Rs 5,400 and Rs 5,000/quintal, respectively (see accompanying table).The only crop that, as of now, is selling at just around MSP levels is cotton. One reason for that is the tight domestic supply position and greater prospect for exports. Those similar hopes of China buying more from India, in order to offset cutbacks in purchases from the US haven’t materialised yet, though, in soyabean. The oilseed, a major crop grown in Madhya Pradesh (which is also going for Assembly polls in just over a month), is now fetching less than Rs 3,000 per quintal in Ujjain. This is again below the current MSP of Rs 3,399 per quintal and also the Rs 3,050 for 2017-18.The other significant crop that has been arriving in the mandis of Haryana and Punjab is Pusa-1509, a short-duration basmati paddy variety. About 10 days back, it was being traded at Rs 2,650-2,700 per quintal, but has since fallen to Rs 2,300-2,400 levels. The main triggers for this have been grain quality issues on account of crop damage from unseasonal rains last week and also uncertainty over Iranian purchases, post the recent US trade sanctions against the Islamic Republic. Prices of par-boiled rice from the new Pusa-1509 crop have come down in the last 10 days, from Rs 5,100-5,200 to around Rs 4,700 per quintal. There has been a decline even for white steamed rice from Rs 6,300-6,400 to Rs 5,900-6,000. This will naturally reflect in the prices paid for paddy as well. What all this simply translates into is the fact that while announcing MSPs for crops and fixing these at over 1.5 times their estimated production costs the so-called Swaminathan formula is easy, actual implementation on the ground isn’t at all so. The only two crops where the MSPs seem realistically implementable are paddy and cotton. In paddy, because there is assured government procurement: Out of India’s estimated 112.91 million tonnes rice production in 2017-18, as much as 38.18 million tonnes was bought by the Food Corporation of India and state agencies. In the case of cotton, farmers are likely to get MSPs this time only because of the market, not the government. But in all other crops including the likes of ragi, sesamum, nigerseed and sunflower the MSPs will probably remain just on paper.

The decision to hike the MSP for kharif crops is welcome relief for the farming community reeling under severe distress due to the collapse of agricultural commodity prices and a general collapse of demand in the economy, much more in the rural economy. This is nowconfirmed from several sources, including a decline in real wages in agriculture (a sustained decline for the last four years), the decline in commodity prices and a general sense of joblessness among the youth. Some of this is also captured in the GDP deflator, which shows a sharp fall from more than 5% in 2016-17 to only around 1% for 2017-18.The demand of farmers, based on the Swaminathan committee recommendations, was MSP at 1.5 times of the C2 cost (total cost including imputed cost). But what has been announced is 1.5 times the A2+FL cost (paid out cost plus family labour cost). The MSP announced barely covers 1.5 times the A2+FL cost and will give a return of only 12% over C2 as against the demand of 50% over C2 cost. But the announced MSP is also significantly lower than the average wholesale price of paddy at ₹1,950 per quintal in April 2018, which is lower than ₹1,980 per quintal in April of last year. I shall like to enlighten about how the different terminologies are used while finalising MSP. The National Commission on Farmers as the panel headed by the agricultural scientist was called did not elaborate on what really constituted “weighted average cost of production” in its report submitted in October 2006. The Commission for Agricultural Costs and Prices (CACP), on the other hand, gives three definitions of production costs: A2, A2+FL and C2. A2 costs basically cover all paid-out expenses, both in cash and in kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel, irrigation, etc. A2+FL cover actual paid-out costs plus an imputed value of unpaid family labour. C2 costs are more comprehensive, accounting for the rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL. Despite these concerns, the announcement of MSP increase is not just timely but also a much-needed respite at the time of rural distress. If properly followed through by adequate procurement, it can certainly raise agricultural commodity prices and also inject much-needed demand if this also materializes in higher income for a large majority of farmers. But it would also require the government to loosen its purse strings beyond what was promised in the budget this year.
Uma Shanker Singh
writer is a retired IFS

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