Euphoria. That’s what the Modi government was hoping for earlier this month when it announced an “unprecedented hike” in the minimum support price (MSP) of 14 crops. But it seems to have proved a damp squib, with farmers’ groups planning a two-day meeting to chart out their protest plans. The new MSPs announced on July 4 are based on a formula to calculate the cost of production that differs from the formula favoured by farmers themselves, and the increase is being criticised as insufficient. The government is using the A2+FL formula, with A2 covering input costs such as expenditure on fertilisers, seeds, hired labour, fuel, irrigation etc., while FL is the imputed value of unpaid family labour. The alternative is the C2+50 per cent formula, where C2 also takes into account rent on land and interest on capital—the National Commission on Farmers headed by M.S. Swaminathan recommended this formula as over 20 per cent of cultivation in India occurs on rented land. But the government has been steadfast in telling Parliament and the Supreme Court that it did not favour the C2 formula.
Reacting to the government’s decision, Swaminathan points out in a statement that while the “MSP announced is higher in absolute terms,” it is “below the recommended level.” He argues that, contrary to the government’s claim of ensuring 50 per cent return on investment, the actual income of farmers is likely to be much lower in most cases. For example, the MSP of common paddy has been hiked from Rs 1,550 to Rs 1,750 per quintal. Taking the C2 cost of paddy last year (2017–18) and assuming a 3.6 per cent rise in input costs based on the input cost index used by the Commission for Agricultural Costs and Prices (CACP), the estimated C2 cost for this year (2018–19) is Rs 1,524. So, the new MSP is C2+15 per cent, not C2+50 per cent. In the case of ragi, the new MSP is C2+20 per cent. Similarly, for moong, the MSP has been raised from Rs 5,575 to Rs 6,975, so it is now C2+19 per cent.
