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Eye on farmer unrest, govt sheds NDA-I’s cautious line and hikes crop MSP

The latest rise in wheat MSP is the highest since the Rs 150-per-quintal hike effected over a decade ago in 2005-06 and 2006-07 during the Congress-led UPA-I government.

Written by Harish Damodaran , Ravish Tiwari | New Delhi | Updated: October 28, 2017 7:12 am
farmers, MSP, farmers protest, minimum support price, farmers, agriculture sector, NDA, NDA governemnt, farmers unrest, Narendra Modi, Congress, Atal Bihari Vajpayee, crop price, agriculture, india news, farmers news, Following a series of relatively modest hikes in the first two years of the government, the latest one appears to have been prompted by the recent spate of farmer protests — mainly in the BJP-ruled states of Madhya Pradesh (Mandsaur) and Rajasthan.

Conscious of sustained attempts by Opposition parties to label the central government as anti-farmer, the Narendra Modi-led NDA-II appears to have switched to a minimum support price (MSP) policy that stands in stark contrast to the conservative approach that was adopted by the NDA-I government under A B Vajpayee.

The best indicator of this is the decision to raise the MSP for the wheat crop to be planted in the ensuing 2017-18 rabi season from Rs 1,625 to Rs 1,735 per quintal. This Rs 110-per-quintal hike in a single year is in stark contrast to Rs 120-per-quintal hike by the NDA-I government during its entire six-year term.

The latest rise in wheat MSP is the highest since the Rs 150-per-quintal hike effected over a decade ago in 2005-06 and 2006-07 during the Congress-led UPA-I government. In fact, the overall hike in wheat MSP under NDA-II — Rs 335 per quintal — has surpassed the cumulative hike of Rs 320 during the UPA-2 administration.

Following a series of relatively modest hikes in the first two years of the government, the latest one appears to have been prompted by the recent spate of farmer protests — mainly in the BJP-ruled states of Madhya Pradesh (Mandsaur) and Rajasthan. In the first year of NDA-II (2014-15), wheat MSP went up only marginally by Rs 50 per quintal, and then by Rs 75 and Rs 100 in the following two years.

But this government’s record with regard to MSP policy has been quite the opposite of NDA-1. The Vajpayee government hiked the MSP by Rs 40 per quintal in its first year (1998-99) and by Rs 30 each in the next two years. But in its last three years, from 2001-02 to 2003-04, there was hardly any hike. The cumulative MSP increase for wheat during the six years of the NDA-1 government worked out to Rs 120 per quintal.

“The present government, too, seemed conservative initially. Its entire effort was to bring down inflation with a pronounced pro-consumer bias. But that now appears to have changed, given the growing pressure from within the ruling party and affiliate organisations to reverse what they perceive as anti-farmer,” said Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices (CACP).

Apart from the political opposition, NDA-II has faced pressure from its wider ideological parivar for a better deal for the farming community. Recently, RSS chief Mohan Bhagwat, during his annual Vijayadashami address, called for “remunerative prices for agricultural produce based on cost of production” to insulate farmers from the vagaries of nature as well as market fluctuations in prices, and insisted that everybody would have to accept these prices without complaint.

Earlier, RSS-affiliated farmers’ organisation Bhartiya Kisan Sangh (BKS), too, had been vocal on farmers’ issues demanding a better deal for the agrarian community. In this context, Gulati pointed to Gujarat’s announcement of a Rs 500 bonus for kapas (raw un-ginned cotton) above the Centre’s MSP of Rs 4,020-4,320 per quintal on different staple varieties — two days before the Assembly election dates were announced — as indicative of the new direction that could be a response to unrest among agrarian communities.

A top official from the Union Agriculture Ministry, however, defended the last MSP decision on wheat, saying that it was based on the CACP’s recommendation. “Production costs for farmers have gone up and we had to compensate them accordingly. The CACP has estimated the latest A2+FL cost for wheat at Rs 817 per quintal, while it is Rs 1,256 as per C2 calculations. The National Commission of Farmers (Swaminathan Committee) had suggested that the MSP be 50 per cent above production cost and we are able to deliver it only for A2+FL,” he said.

A2+FL includes all paid-out expenses, both in cash and in kind incurred by farmers, plus an imputed value of unpaid family labour. C2 costs are more comprehensive, covering rentals and interest forgone on owned land and fixed capital assets, respectively, on top of A2+FL.

The overall increase in the wheat MSP under this government works out more than the Rs 320 cumulative hike during UPA-2, though below the Rs 450 under UPA-1. In fact, UPA’s return to power in the 2009 Lok Sabha elections is widely credited to its MSP hikes along with its nation-wide farm loan waiver announced in 2008.

But UPA’s MSP hikes took place in the backdrop of spiralling international agri-commodity prices. The MSPs, then, merely followed the rise in international prices. This government’s tenure, by contrast, has coincided with a collapse in global prices.

“Today, the landed cost of wheat from Ukraine, Russia, Bulgaria, France and Argentina in Indian ports works out to around $215-220 or around Rs 14,000 per tonne. Even premium Australian white wheat is importable at $260-265 or about Rs 17,000 per tonne. The latest MSP (to be paid to farmers in India) is way above what it costs to import even after adding shipping costs,” said S Pramod Kumar, executive director of Bengaluru-based Sunil Agro Foods Ltd, and secretary, Roller Flour Millers Federation of India.

Gulati predicts that the government’s next move would be to hike the import duty on wheat, currently at 10 per cent. “If they don’t do it, flour mills will simply import rather than purchase wheat from Uttar Pradesh, Madhya Pradesh, Punjab and Haryana. And these imports will happen before our new crops starts arriving in the mandis from March-April,” he said. The wheat now being traded globally is mainly of Black Sea origin, which is harvested from July-end, while the Australian crop comes towards December.

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  1. L
    Nov 1, 2017 at 9:58 am
    Interesting read. The table could have been clearer in terms of CAGR increases in MSP effected by each regime as well as percentage increase in a year. After all, (ref. the table), the increase of ₹150 on ₹700 in 2006-07 is not quite the same as ₹110 on ₹1625 in 2016-17 in terms of fiscal or inflationary impact.
    1. S
      Oct 28, 2017 at 11:36 am
      a welcome step... all should appreciate this move...
      1. S
        swaminathan s
        Oct 28, 2017 at 10:54 am
        Modi is conscious of the fact that many agrarian reforms are yet to start under NDA 2 Sharadarad Pawar made a mess of it and BJP is still maling lt murkierthere is no competent minister to independently deal agri portfolio. what prevents Modi to talk to Tamil Nadu farmers and solve cauvery water problem and setting up cauvery water board. They can certainly not rule entire India by BJP Let them realise and do justice to all. Time is runningout. People may side Ra Ga out of frusturation withBJP
        1. Joy Jacob
          Oct 28, 2017 at 10:02 am
          Farming is the first step to produce food. It is turning unattractive as the return on investment is, quite often, negative to the farmer. Weather fluctuations also adversely affect productivity. Market prices during harvest time also do not remain stable. Farmers tend to seek better prospects in other fields for income generation to supplement farming income. This trend has an adverse impact on the adoption of technological advances in farming techniques and in turn affects productivity and international compe iveness of farm products. Imposing additional import duty may considered appropriate to support retention of remunerative farm gate price. It will increase the market price and the demand for compensation from the organised sector will lead to upward revision of ry and perks paving the way to higher rate of inflation. The right solution is development of adequate infrastructure, to make our farming operations efficient to make it internationally compe ive.
          1. D
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