FM TUNES INTO KISAN CHANNEL
HELP FOR FARMERS Finance minister said minimum support prices (MSPs) for kharif crops to be set at 1.5 times the cost of cultivation, leading to 50% returns
Kicking off with a burst of announcements for the farm sector, finance minister Arun Jaitley ON Thursday said the National Democratic Alliance (NDA) government would deliver on its promise of ensuring 50% returns for farmers, seeking to address rural angst over collapsing prices.
In his budget speech, Jaitley said federally determined minimum support prices (MSPs) for summer-sown (kharif) crops this year would be set at 1.5 times the cost of cultivation, which translates to 50% returns.
This has been a key demand by farmers protesting in several agriculturally developed states, such as Maharashtra and Madhya Pradesh.
Jaitley surprised critics by declaring that his government had already adhered to this pricing benchmark for most crops in the ongoing rabi-sown (winter) season. He said this would be henceforth applied for the rest of crops. “The government has decided to keep MSP for the all unannounced crops of kharif at least at one and half times of their production cost,” he said.
The finance minister did not announce any specific price-deficit payment scheme to compensate farmers directly for market losses when prices dip below MSPs, as was widely anticipated. Such a scheme is already being implemented in Madhya Pradesh. He, instead, said that Niti Ayog would soon come out with a “foolproof mechanism” on how to compensate farmers when prices crash.
The budget announcement came amid a rough patch in the agriculture sector, forecast to slow down 2.1% in 2017-18, against 4.9% in the previous year. The announcement of 50% returns over costs set off a flurry of debate on the fineprint, with farm leaders wondering which of the two measures of costs — the so-called ‘C2’ or ‘A2 + FL’ — the 2017-18RE 2018-19BE
Minimum support price at 50% over costs. Budget didn’t clarify what cost measure it’ll use
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New markets: Develop 22,000 % change government would adopt. Jaitley did not specify the measure that will be used.
‘C2’ is a more comprehensive measure of a farmer’s cultivation costs, which includes imputed rental value of land, depreciation and interests on capital. These are not part of the ‘A2+FL’, a narrower measure that includes input costs and imputed value of only family labour. e-linked Gramin Agricultural Markets Market infrastructure: Agri-Market Infrastructure Fund of ~2000 cr Collectivisation: Horticulture clusters Exports: Liberalisation policy to realise agri export potential of ~10,000 cr Bamboo: Mission worth ~1290 cr
“The crux of the battle on prices boils down to the government’s definition on cost of production…The government seems to have chosen a lower cost measure so that it can declare that it is already providing cost + 50% in this rabi,” said Kiran Vissa of the Rythu Swarajya Vedika, part of a platform for farmer organisations. He said when PM Narendra Modi had promised 50% returns in his elec- tion campaign, MSPs were already giving higher returns than under Modi’s tenure.
In 2007, the MS Swaminathan Committee had recommended 50% returns for crops, which the BJP’s 2014 poll manifesto adopted. In the para containing the specific recommendation, the Swaminathan report said MSP should be 50% over “costs of cultivation”, not specifying which measure. But in its annexure, the report used C2 costs to calculate net farmer returns.
Economist Ashok Gulati told HT that for rabi crops, the MSPs were closer towards 50% of costs. In wheat, it is in the region of 44%-45%, but in other crops it is just 20%-30%. “The real challenge is for kharif crops. In paddy, MSPs and returns are not more than 10%-12%,” he said. If the government actually sets MSPs at 1.5 times the C2 costs, then it would also mean a huge jump in the food subsidy bill and make India’s produce expensive in the exports market, he said.
The budget announced a new scheme called ‘Operation Greens’ to promote value addition for tomato, onion and potato. This would be similar to ‘Operation Flood’ that revolutionsed the dairy sector, Jaitley said. Two funds to boost fisheries and animal husbandry were allotted ₹10,000.
The budget also set a target of ₹11 lakh crore for agriculture credit in 2018-19, a 10% rise. Jaitley said 22,000 new and existing rural marketplaces would be developed to give farmers access to buyers. Tenant farmers would be made eligible for farm loans under a new policy, he said, adding a liberalised farm-exports regime was in the works. Various ministries will have ₹14.34 lakh crore in all to create rural jobs and infrastructure.
With a view to boost food processing, which can improve commodity prices, allocation to the food processing ministry was being doubled from ₹715 crore in 2017-18 to ₹1,400 crore in 2018-19, Jaitley said.
NEW DELHI: MSP: