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‘Finance minister must clarify what cost yardstick will be used on MSPs’

The Budget claim requires clarity, says Kavitha Kuruganti of the Alliance for Sustainable & Holistic Agriculture.

india Updated: Feb 02, 2018 19:33 IST
Zia Haq
Zia Haq
Hindustan Times, New Delhi
Union Budget,Arun Jaitley,MSP
Kavitha Kuruganti of the Alliance for Sustainable & Holistic Agriculture

In his Budget speech, Union finance minister Arun Jaitley said the government “declared minimum support price (MSP) for the majority of rabi crops at least at one-and-a-half times the cost involved”. This claim requires clarity, says Kavitha Kuruganti of the Alliance for Sustainable & Holistic Agriculture, in an interview with Zia Haq. Kuruganti was a member of the Ramesh Chand Committee on farm prices.

The FM announced MSPS will be set at 1.5 times over costs of production, or 50% returns. He hasn’t clarified if this increase will be over the so ­called C2 costs of cultivation, which is the main demand, or A2 costs. Can you explain why this is vital?

In terms of cost accounting principles and practice, it is important to get a comprehensive picture of costs, which include opportunity costs. That will then give you a good picture of net returns. The Commission on Agricultural Costs and Prices itself calculates net returns in terms of ‘C2 cost’ and not ‘A2’ (paid out components + family labour). C2 is a cost estimation, which (unlike A2) also includes rental value of own land and value of owned fixed capital assets. The reason why the government should exclude these two additional components also -while it includes imputed family labour on own land -in its selective cost definition, is irrational. Meanwhile, in the Ramesh Chand Committee report, we pointed out to various other ways in which cost is suppressed. That needs to be addressed too.

People have argued that farmers’ costs are underestimated.

While that is the theoretical part of the issue at debate here, what is important to realise is that official data is clearly showing that our farmers are in distress. Their income is not growing. A majority of farmers has negative net returns. The intersectoral disparities are increasing, which are not good in any society. There is also a moral imperative, that farmers are keeping us all alive, and we owe it to them.

So are you saying the MSP claim is misleading?

Prices are clearly the most proximal and direct ways to improve incomes. The government should stop trying to cheat farmers here. This government has given significantly lower margins on an average, whichever cost definition you adopt, compared to the earlier government. This, despite explicitly promising at least 50% margins over the cost of production. They have to make good on their promises.

What are the kind of returns farmers are now getting? In terms of the ground reality, is it true that MSPS for the current rabi­ sown season gave 50% returns, as claimed by the finance minister?

The NSSO’S (National Sample Survey Office) 70th round shows that most farmers have monthly incomes lower than their monthly basic expenses. The average per day per capita earning in our farm households is lower than the legally prescribed minimum wages for agricultural workers in the country. The finance minister made an incorrect statement when he said that in this rabi, they have provided 50% margins since wheat, which had the highest MSP rise, has just 38% margin over C2 costs of cultivation. Not a single rabi crop has touched a 50% margin over C2.

Would you agree that this Budget has put the rural economy and agriculture back on the government’s priority?

I will not agree. It is true that the current farmers’ unrest and struggles, in addition to recent election results, have put farmers back on the national debate, but the government hasn’t incorporated any concrete thing that would address farmers’ problems. Only 2.3% of the entire budget has been given to agriculture. In fact, this government is being unresponsive and irresponsible towards farmers.

Do you think Operation Greens for higher values through processing from tomato, onions and potatoes is a step towards focusing on incomes ­end of the spectrum?

The details of this are yet to be seen. What we have been asking for is an MSP for these perishables also, which is guaranteed to farmers, in a statutory manner, along with other agri commodities.

First Published: Feb 02, 2018 19:33 IST