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Explained: MSP and govt panel’s task

The government has notified a committee tasked with making MSP more effective and transparent, but notification does not mention the legal guarantee demanded by farmers. What is on the panel’s agenda; how will it function?

Paddy is one of 22 mandated crops for which MSP is announced. (Express Archive)

Earlier this week, the government notified a committee to “promote zero budget based farming”, to “change” crop pattern keeping in mind the changing needs of the country, and to make MSP (minimum support price) more “effective and transparent”. The government has named 26 members including the chairman of the committee, and kept three places for representatives of the Samyukta Kisan Morcha (SKM), which had led a sustained farmers’ agitation against three agriculture laws, now repealed. The SKM has, however, rejected the committee and announced that it will not nominate any representatives.

Why has the committee been set up?

It has been constituted by the Ministry of Agriculture and Farmers’ Welfare, as a follow-up to an announcement by Prime Minister Narendra Modi on November 19, 2021 when he had declared the government’s intention to withdraw the three farm laws.

The protesting farm unions led by the SKM had demanded a legal guarantee on MSP, based on Swaminathan Commission’s ‘C2+50% formula’ (C2 is a type of cost incurred by farmers; see box). This was in addition to their demand for repeal of the three farm laws — Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; and the Essential Commodities (Amendment) Act, 2020.

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So, will the committee deliberate on the legal guarantee of MSP?

Its terms and references do not mention legal guarantee of MSP. What they do mention is making MSP “more effective and transparent”. “As per announcement of Hon’ble Prime Minister that ‘A committee will be constituted to promote Zero budget based farming, to change crop pattern keeping in mind the changing needs of the country, and to make MSP more effective and transparent…’,” it says.

The matter of a legal guarantee came up in Lok Sabha on Tuesday, when a question was put to the Agriculture Ministry: “Whether the Government had assured the Samyukta Kisan Morcha (SKM) for the constitution of a committee to provide legal guarantee of Minimum Support Price (MSP) to farmers during December, 2021 and if so, the details thereof”.


The Ministry replied, “No, Sir… The Government had assured the formation of a Committee to make MSP more effective and transparent, to promote natural farming and to change crop pattern keeping in mind the changing needs of the country. Accordingly, a Committee has been constituted consisting of representatives of farmers, Central Government, State Governments, Agricultural economists & Scientists, etc.”

What is the committee tasked with, then?

Under the heading ‘Subject matter of constitution of the Committee’, the committee is to look at MSP, natural farming, and crop diversification. For MSP, its agenda is:


* Suggestions to make available MSP to farmers of the country by making the system more effective and transparent

* Suggestions on practicality to give more autonomy to Commission for Agricultural Costs and Prices (CACP) and measures to make it more scientific

* To strengthen the Agricultural Marketing System as per the changing requirements… to ensure higher value to the farmers through remunerative prices… by taking advantage of the domestic and export opportunities.

On natural farming, the committee has been asked to give “suggestions for programmes and schemes for value chain development, protocol validation & research for future needs and support for area expansion under the Indian Natural Farming System by publicity and through involvement and contribution of farmer organizations”. It has also been tasked with suggesting strategies for research and development institutions being made knowledge centres, and introducing a natural farming system curriculum in educational institutions; suggesting a farmer-friendly alternative certification system and marketing system for natural farming processes and products; deliberating on issues related to chain of laboratories for organic certification of natural farming products, and other aspects.

For crop diversification, the committee will deliberate on, among various aspects, mapping of cropping patterns of agro-ecological zones; strategy for a diversification policy to change the cropping pattern according to changing needs; arrangement for agricultural diversification and a system to ensure remunerative prices for the sale of new crops.


What will be the tenure of the committee, and how will it function?

The five-page notification does not specify the tenure of the committee. No deadline has been given for submitting its suggestions.


The notification does not mention anything about the procedures and functioning of the committee either. It does not specify, for instance, how decisions will be taken, how many members will be required to hold a meeting, when it should hold its first meeting, and how many times in a year it should meet.

What is its composition?

It will be headed by former Agriculture Secretary Sanjay Agrawal, and has Ramesh Chand of NITI Aayog as member. Apart from the three positions kept aside for representatives of the SKM, which has announced it will not nominate members, the committee’s other members include two agricultural economists, an award-winning farmer, five representatives of farmer organisations other than the SKM, two representatives of farmers’ cooperatives/groups, one member of the Commission for Agricultural Costs and Prices, three persons from agricultural universities and institutions, five Secretaries of the Government of India, four officers from four states, and one joint secretary from the Agriculture Ministry.


How is MSP fixed?

The Centre announces the MSP (which is not legally guaranteed) for 22 mandated crops (and Fair & Remunerative Price, or FRP, for sugarcane) on the basis of the recommendations of the CACP. These include 14 kharif crops (paddy, jowar, bajra, maize, ragi, tur/arhar, moong, urad, groundnut, soyabean, sunflower, sesamum, nigerseed, cotton), six are rabi crops (wheat, barley, gram, masur/lentil, rapeseed and mustard, and safflower) and two are commercial crops (jute and copra).

The CACP takes into account various factors including demand and supply; cost of production; market trends; a minimum 50% margin over cost of production; and likely implications of MSP on consumers.

The CACP calculates three types of costs — A2, A2+FL and C2 — for each mandated crop for different states. The lowest of these costs is A2, which is the actual paid-out cost incurred by a farmer. Next is A2+FL, the actual paid-out cost plus imputed value of family labour. The highest of the three costs is C2, defined as ‘Comprehensive Cost including Rental Value of Own Land (net of land revenue and interest on value of own fixed capital assets (excluding land))’.

Although all three costs are calculated, the CACP eventually recommends — and the government announces — MSP on the basis of A2+FL. Protesting farmers have been demanding MSP based on C2, besides a legal guarantee.

First published on: 21-07-2022 at 04:00 IST
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