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Karnataka Polls 2018: Modi’s MSP Promise Is A Farce; Yogendra Yadav Throws A Challenge

Farmers' crisis has always been in the manifesto but why is the same promise reiterated as a new agenda?

Swaraj Abhiyan’s founder Yogendra Yadav has thrown an “open challenge” to Prime Minister Narendra Modi to prove that the promises he is making to Karnataka’s farmers ahead of the May 12 Assembly elections will be fulfilled. He asked Modi to name a mandi anywhere in the country where “all farmers receive the existing Minimum Support Price (MSP)” let alone the promise he was making this time of providing 1.5 times the cost of production of crops.

Modi on Friday said the Bharatiya Janata Party (BJP) had pledged to ensure that farmers get 1.5 times the cost of production as Minimum Support Price (MSP) to fulfill his vision of doubling farmers’ incomes.

Yadav took to Twitter to challenge this bargain, saying, “Please name one Mandi anywhere in the country where ALL farmers receive the existing MSP, let alone 1.5 times their cost. It’s ok if you can’t do that. But stop insulting farmers by spreading such lies.”

Decoding MSP

The promise of providing farmers with 1.5 times more than the cost of production as MSP is not new. The Union government announced it in January 2018 on their website and it has been implemented in states like Madhya Pradesh and has not shown much of a difference. Economics experts say that MSP at 1.5 times the cost of production has been in the BJP manifesto since Narendra Modi’s 2014 Lok Sabha campaign, but the promise has not being implemented.

Under the Centre’s Bhavantar Bhugtan Yojan, the MSP for eligible crops is declared by the Commission for Agricultural Costs and Prices (CACP), a Wire report said. How CACP calculates production cost — A2 (actual paid out cost), A2+FL (actual paid out cost plus imputed value of family labour) and C2 (comprehensive cost including imputed rent and interest on owned land and capital). Hence, C2 > A2+FL > A2.

The whole implementation of this scheme depends on whether the government is using A2+FL or C2 to calculate MSP. The difference between A2+FL and C2, according to projected costs of 2017-18 rabi season crops, is quite substantial. For wheat, A2+FL was Rs 817 whereas C2 was Rs 1,256.

The Wire report mentions that the MS Swaminathan report—often invoked in farm crisis debates—proposes C2, and not A2+FL, as the MSP. Farmers from various states have also been relying on MSP being based on C2, Devinder Sharma, an agricultural policy expert told The Wire.

Avik Saha, the national convenor of the Jai Kisan Andolan, said that when Prime Minister Narendra Modi, during his 2014 election campaign, promised that MSP will be set at cost plus 50 per cent, the MSP for most crops was already higher than A2+FL by more than 50 per cent. Therefore, by cost, he must have meant C2.

Ashok Gulati, agriculture economist, said that if A2+FL is taken as cost of production, then there is nothing new in the scheme. “A lot of unnecessary confusion has been created about this. The MSP has been 50 per cent higher than A2+FL for the last ten years. Even at the time the BJP had put the promise of cost plus 50 per cent in its manifesto, the MSP was already more than 50 per cent higher than the A2+FL. So, if they had A2+FL in mind, why put this promise in the manifesto? The MSP was already higher,” said Gulati.

“If we take A2+FL, the MSP for wheat is more than 100 per cent higher. What will you do? Will you now reduce the MSP for wheat?” said Gulati in The Wire report.

TA Haque, Professor, Council for Social Development, and Former Chairman, CACP, wrote in Business Today: “The reasons for not considering C2 are the anticipated increase in food subsidy bill and an adverse effect of higher MSP on inflation. However, past experience shows the rise in MSP helps increase production and contain price inflation by bridging the demand-supply gap.”

Though Arun Jaitley and Modi have not spelt out which cost they are implying, an official at the Ministry of Agriculture, on the condition of anonymity, told The Wire author that it will be A2+FL that will continue to be used to determine MSP.

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