News Report: Understanding Minimum Support Price (MSP) for Farmers in India

The Demand for Legalizing Minimum Support Price (MSP)

Farmers in India have taken to the streets once again to protest, and this time their biggest demand is the legalization of Minimum Support Price (MSP) for all crops. Many news anchors and YouTubers claim that if the government fulfills this demand, it will devastate the country's economy and cost more than 10 lakh crores. But what is the truth behind the farmers' demand? Let's understand the reality of the farming industry.

The Reality of Farming Industry in India

In India, the Maximum Retail Price (MRP) is the maximum price at which goods can be sold. It is set by the government to protect consumers from exploitation by companies and shopkeepers. Without MRP, one can only imagine how people would be exploited. For example, during water scarcity, a bottle of water could cost ₹100, and during a shortage of cooking oil, it could be ₹1000 per liter. MRP ensures that consumers are not taken advantage of. Similarly, MSP ensures that farmers are given a minimum price for their crops, preventing exploitation by companies and middlemen.

MSP is the minimum price at which farmers can sell their produce. It is determined to cover their input costs, including seeds, fertilizers, labor, electricity, and other expenses, plus a 50% profit margin. By purchasing crops at MSP, farmers are assured that they will at least recover their production costs. MSP is considered a logical solution, which is why most politicians support it, including Prime Minister Narendra Modi.

In 2014, before becoming the Prime Minister, Narendra Modi recognized the importance of MSP for every farmer. He said, "Minimum Support Price is like a shield for every farmer and has become a significant tool for the government." His idea was to have a uniform MSP for crops across the country, so farmers are not forced to sell at different rates in different states. However, the government, which is the largest buyer, should also buy crops at MSP, just as private traders do. If the buyers have formed a cartel, then farmers should be guaranteed a minimum support price for their produce, just like how MRP protects consumers.

The Calculation of MSP: C2 Cost of Production

The calculation of MSP has been a topic of debate. A high-level committee on the Long-Term Grain Policy, led by economist Abhijit Sen, recommended that MSP should be determined based on the Comprehensive Cost of Production (C2 Cost). C2 Cost includes not only A2 and FL Costs but also Ond-Capital Assets and Rental Value of Land. A2 Cost is the actual expenses incurred by farmers for seeds, fertilizers, labor, etc. FL Cost is the cost of family labor, which considers the opportunity cost of family members who could have worked elsewhere for a salary. In addition to these costs, there are marketing and post-harvest expenses. These costs are taken into account while determining MSP, as mentioned in the Swaminathan Commission Report.

In 2004, M.S. Swaminathan, then Chairman of the National Commission on Farmers, published five reports between 2004 and 2006, with a total of almost 2000 pages. In the fifth report, it was mentioned on page 246 that MSP should be at least 50% more than the Weighted Average Cost of Production. Furthermore, in September 2017, Swaminathan tweeted that MSP should include procurement, storage, and distribution costs, which are part of post-harvest expenses. Therefore, MSP needs to consider not only C2 Cost but also the cost of post-harvest activities.

The Swaminathan report also highlighted that farmers' income is comparable to the salary of civil servants. The input costs, capital assets, and marketing/post-harvest expenses should be accounted for, just as companies include various expenses in their financial statements. Most companies include their office vehicles, travel, television, trolley bags, blazers, and networking expenses as part of their business expenses. Similarly, a farmer also needs to buy a tractor, cultivator, and other equipment for farming purposes. These are considered ond-capital assets. Farmers are entitled to have their costs accounted for, including input costs, family labor costs, capital assets costs, and marketing/post-harvest expenses.

The Impact of the Three Farm Laws on Farmers

The passing of three black laws in Parliament has been a topic of discussion. In a previous video, I explained how these laws were passed unconstitutionally. It is not that farmers were not allowed to engage in contract farming with corporates before these laws. Obviously, they could. However, the three farm laws had provisions that favored corporates over farmers. The laws allowed corporations to buy from anywhere, sell anywhere, and avoid taxes on government mandis (markets). It also provided room for hoarding, artificial price rises, and major advantages for big corporate companies. The comparison with farmers is evident in the fact that last year, a report published by the Reporters' Collective revealed how these farm laws were heavily favoring corporates.

Sharad Marathe, an individual who had written a letter to Rajiv Kumar, the Vice Chairman of NITI Aayog, had discussed the need for a market-driven agricultural business model in India. In the memorandum released by NITI Aayog on October 16, 2017, the concept note by Sharad Marathe was mentioned. The note suggested that a task force should be formed to discuss and implement the market-driven agricultural business model. Who was on that task force? It was led by Sharad Marathe himself, along with major corporations such as Adani.

It is clear from the above examples that MSP is not only crucial for farmers but also for the overall development of India. The government needs to stand with the farmers and ensure that they are given the right price for their produce. Prime Minister Narendra Modi has made remarkable promises, saying "Jai Jawan, Jai Kisan" (Hail the soldier, Hail the farmer). He has also said that more farmers have died by suicide than soldiers have died in the battlefield. If India wants to change its future, it needs to change the lives of its farmers. The focus should be on giving farmers MSP at C2 Cost plus 50% and resolving the issues surrounding the three farm laws.

It is evident that Narendra Modi understands the problems and challenges faced by farmers. He has not only highlighted the problems but also given solutions. It is now up to the people to support this cause and bring about positive change in the lives of farmers. Let us remember the words of Lal Bahadur Shastri, "Jai Jawan, Jai Kisan" and work towards the betterment of our nation.