‘C2’ costs for MSPs better than giving loan waivers’

NEWDELHI: Noted agricultural scientist Monkombu Sambasivan Swaminathan, who played a leading role in India’s Green Revolution, has said the NDA government should fix minimum support prices (MSPs) for farm produce based on a comprehensive measure of cultivation costs that includes the imputed cost of capital and the rent on the land ( called “C2” ) to give farmers 50% returns, rather than a narrower measure that takes into account the costs incurred by the farmer and the value of family labour (“A2+FL” ), which the government intends to use.

How cost of production is calculated matters. MSPs announced for winter-sown crops in January show that if C2 costs are used as a benchmark, returns for most crops are lower than 50%. However, when A2+FL is used, returns are higher than 50% in a handful of crops such as paddy and wheat.

Swaminathan had first recommended that MSPs – which act as a floor price to avoid distress sales – should be “at least 50% more than the weighted average cost of production” in the 5th report of the National Commission on Farmers set up under his chairmanship. The BJP’s 2014 poll manifesto had promised to guarantee farmers 50% over costs in line with this proposal. This has now become a key political demand from farmers.

To fulfil this, the Union budget presented on 1 February announced that MSPs would be set at 1.5 times the cost of cultivation to ensure farmers get 50% returns. It however did not clarify the measure of costs that would be used. “When we recommended 50% over costs, we meant complete costs called C2, which includes all assumed costs. In fact that is what the farmers are also demanding,” Swaminathan told HT over phone from Chennai.

Stressing that MSPs should include the broadest measure of a farmer’s costs including rental value of land, the scientist said: “Many governments are announcing loan waivers.” On Friday farm minister Radha Mohan Singh told HT that to fix 50% returns, the Centre would use the “prevailing method” called “A2+FL” to calculate cultivation costs. This includes all outof-pocket expenses of farmers plus the value of family labour used. Farmer organisations have been demanding the use of “C2”, which also includes imputed costs of capital and rental on land. Finance minister Arun Jaitley had also stated in Parliament on February 9 that the government would use A2+FL.