Thousands of farmers have protested against the Center’s three agricultural laws: Trade and Trade in Agricultural Products (Promotion and Facilitation), Price Guarantee Agreement for Farmers (Empowerment and Protection), and Agricultural Services and Essential Products (Amendment). They fear that the laws would pave the way for the dismantling of the minimum support price (MSP) system, leaving them at the “mercy” of large corporations.
The Center allowed protesting farmers from Punjab and Haryana to enter the capital and hold a protest rally on the Nirankari field after they refused to back down despite the use of tear gas and water cannons by the police. The government also extended an invitation to speak on Tuesday.
Meanwhile, Prime Minister Narendra Modi has said his government is committed to offering a fair price to farmers through MSP and that government purchases will continue as before. Here’s why it is an absolute must for farmers.
WHAT IS THE BIGGEST FEAR?
Farmers have opposed the three contentious farm laws that were enacted by the Center on September 27. They have been demanding the repeal of the agricultural laws, claiming that none of the stakeholders were consulted prior to the enactment of the laws. Their biggest fear is the end of Minimum Support Price (MSP) acquisitions due to these laws. However, the Center has denied any uncertainties regarding MSP. The Center has asserted time and again that the laws will transform the agricultural system in India and allow farmers to sell their products anywhere in the country.
WHAT IS MSP?
MSP is essentially a form of market intervention undertaken by the government to provide a safety net for farmers in the event of a price drop. It is a price for crops that the government guarantees to farmers at all costs and in all circumstances. This week, the government is likely to announce the MSP for the Kharif harvest only, as the Indian agricultural cycle is currently in the Kharif season.
The MSP increase has been necessary due to falling profit margins for farmers, according to a report. This has caused great distress on the farms. The Center aimed to double farmers’ incomes by 2022.
WHO ESTABLISHES THE MSP?
The original recommendation of the Swaminathan Committee was to set the MSP at levels “at least 50 percent higher than the weighted average cost of production.” However, the committee could not define what constituted the weighted average cost of production.
The government sets the MSP for 22 mandatory agricultural crops based on the recommendation of the Commission on Agricultural Costs and Prices (CACP). The list of crops protected by price fluctuations includes 14 kharif crops, six rabi crops and two cash crops. The CCAP is also responsible for setting the fair and remunerative price (PRF) of sugar cane. The CACP takes into account factors such as national and international prices, price parity between crops, the general situation of supply and demand, and also the probable effect of the MSP on inflation.
HOW IS MSP CALCULATED?
According to the formula prescribed by the Swaminathan Committee, there are three variables that determine the cost of production: A2, A2 + FL and C2.
A2 includes out-of-pocket expenses borne by farmers, such as term loans for machinery, fertilizers, fuel, irrigation, cost of hired labor, and land leasing.
The second metric, A2 + FL, takes into account the imputed value of unpaid work by family members, in addition to the cost paid.
The Integral Cost (C2) reflects more the real cost of production, since it takes into account the rent and the forgiven interest on the land and the property machinery, in addition to the A2 + FL rate. The ideal formula according to the Committee would be: MSP = C2 + 50% of C2.
WHY WAS THERE A NEED FOR MSP?
In the 1960s, after India faced a food shortage due to several years of drought, policies were designed to maintain food stocks, providing price support to farmers by declaring and purchasing at a minimum price support for various commodities and selling grain at subsidized rates. for those who cannot afford it.
HOW MUCH DOES THE GOVERNMENT BUY?
Of the 24 commodities, government procurement is highest for wheat and rice. The Center purchases about 30 percent of all the wheat and rice produced in the country and about 6 to 7 percent of other staples.
.
