The Union Government announced minimum support prices (MSP) for 17 agricultural commodities (14 kharif crops) on July 4, 2018. The announcement came in the backdrop of the assurance provided by the Prime Minister to sugarcane farmers that the Government is going to provide MSP for kharif crops at one and half times of production cost. However, a closer look at the MSP reveals that for no crop was MSP more than 50 per cent of production cost.

The National Commission on Farmers, headed by Dr M. S. Swaminathan, recommended that MSP be at least 50 per cent more than cost C2, which includes all paid-out costs, imputed value of family labour, interest value on owned capital assets, and rental value of owned land. According to the Government, MSPs in 2018-19 are better than MSPs in 2017-18 in terms of covering production costs. However, Figures 1 and 2 show that MSPs declared in 2018-19 have not covered more than 50 per cent of cost C2 for any kharif crop.

Even at this level, MSP will be effective only if it is combined with other measures such as higher procurement by the Government. In this regard, we reproduce below excerpts from the statement issued by Dr M S Swaminathan to the press on July 4, 2018:

The economic and ecological health of agriculture is not good as is clear from the massive protests by kisan organisations and the re-occurrence of farmer suicides. The two main demands of the farmer’s movement are for loan waiver and remunerative prices.

The monsoon and the market play an important role in the profitability and stability of income in agriculture. The government has taken steps to improve crop insurance but the coverage and performance is still far from satisfactory and risks are still high leading to demand for higher price and credit reform.

The marketing support which farmers need has three components:

1. A minimum support price or MSP based on the formula of C2 + 50%
2. A favourable procurement policy to ensure that farmers do receive the MSP
3. Increasing consumption through the effective implementation of the Food Security Act, school noon meal programmes, etc.

Higher MSPs are welcome but there is very little procurement at MSP, except in the case of wheat and rice. This is clear from the experience of farmers who cultivated more pulses, on the expectation of procurement but were let down by a crash in market prices. Indeed, for many crops including urad, tur, maize, groundnut, soyabean, bajra, rapeseed and mustard, the weighted average mandi price was below the corresponding MSP before the monsoon, (according to CRISIL).

Other steps such as those recommended by the National Commission on Farmers which will help to improve both income stability as well as total income from farming will have to be introduced. Appropriate measures are also needed to ensure that groundwater exploitation, and other eco-destructive activities, are limited.

To sum up, announcement of higher MSP without associated steps to improve the health of farming will not stem the current distress of a large majority of farmers.