New DelhiIf the government’s Minimum Support Price Program (MSP) helped to properly create a minimum price, farmers in the top 11 agricultural states would have earned, on average, nearly Rs 1.9 billion more from selling their produce.
According to The cables data analysis from Agmarknet, the government’s price information system, which obtains data on arrival of prices and quantities of 3000 Wholesale mandis nationwide: Farmers on average were denied at least Rs 1,881 crore by having to sell their produce below the MSP in October and November.
The most important “losses” occurred in the sale of corn. Prices ranged from Rs 1,100 to Rs 1,550 per quintal, down from the RRP of Rs 1,850, and the total income denied to farmers in October and November was a staggering Rs 485 million.
In the case of groundnuts, due to sales below the MSP, farmers suffered notional losses in the order of Rs 333 million.
Even for rice paddy, sales below the MSP meant that in some of the major producing states, apart from Punjab and Haryana, the total loss of revenue was Rs 220 million. In all the other major rice producing states, Chhattisgarh, Uttar Pradesh and Telangana, average prices were 15% below MSP.
For the analysis, we used the weighted average monthly crop prices at the state level and the quantity sold at the state level available on Agmarknet.
The difference between the average monthly price in each state and the MSP was multiplied by the quantity sold in each state to arrive at the notional profit or loss figure for each crop in each state.
To arrive at the total notional loss figure, we only considered those crops in those states where average prices were below the MSP, as this would be a more accurate representation of the losses incurred due to sales made below the MSP.
If we take into account the gains made on some crops in some states, essentially rice in Punjab and Haryana, Rs 1,400 crore is the theoretical net loss over the two month period. We only considered states where 95% or more of the crop product in question was sold. As a result, our loss forecast is likely to be an understatement.
Finally, it is important to remember that the data we have used is based on the Agmarknet system, which provides prices and quantities for transactions within mandis. A substantial part of the transactions also take place outside the mandi, where the price obtained by the farmer is likely to be even lower because the transaction cost incurred by the trader to reach the farmer should be taken into account.
Farmers gather in large numbers during their ‘Delhi Chalo’ protest march against the new agricultural laws, at the Kundli border in Sonipat on December 2, 2020. Photo: PTI
Sale remains below MSP
One of the key demands of the ongoing farmer agitation is that the MSP must become a legal right. The reason for this demand is that even though the MSP is declared for 23 crops, most of them are generally sold at much lower rates. It is mainly two crops, rice and wheat, that are actually sold at or above the MSP price, and even this is often the case in Punjab and Haryana. And that’s also why farmers in these two states will lose the most if purchases are reduced in the MSP.
Our analysis only reinforces what is well known. That the MSP ad for most crops is kept mostly on paper and in the absence of effective procurement, which is best in Haryana and Punjab, farmers can rarely demand prices that are at or above MSP.
For example, the average Bajra price in Karnataka was 45% below the MSP in October and 42% below the MSP in November.
Jowar in Madhya Pradesh sold 56% below the MSP in October and 33% below the MSP in November.
Average prices at the state level were substantially higher than the MSP for under-purchased seasamum. Urad prices were around 10% higher than the MSP in both October and November in Maharashtra and Karnataka.
The price of Arhar also started to rise in November, but around Rs 1,000 a quintal in Maharashtra and Karnataka, it remained lower than the MSP in Madhya Pradesh, where most of the purchases are made.
Apart from these crops, only Punjab and Haryana rice sold at higher average prices than the MSP in October and November (about 1% more).
At the state level, the total net theoretical loss was the highest in Karnataka at Rs 403 million. Prices for corn, soybeans, peanuts, moong, bajra, cotton, jowar, ragi and rice were below the MSP in both months. While Arhar’s price was higher than the MSP in both months, Karnataka is a marginal player in getting the pulse and it didn’t alter the overall picture much.
Karnataka is a major player in corn and recorded the largest crop arrivals in the country in October and November combined. But farmers suffered a loss of Rs 130 crore in harvest as the average price was 21% below MSP in October and 16% below MSP in November. Soybean farmers also suffered in the state, recording losses amounting to Rs 82 crore.
In Madhya Pradesh, average prices were well below MSP for corn, cotton, soybeans, arhar, jowar, and groundnuts. In fact, for corn, whose prices have suffered this year throughout the country, in part due to the annihilation of the poultry industry, prices were 39% and 29% below the MSP for October and November respectively.
Farmers in Gujarat reported losses of more than Rs 100 million each in peanuts and cotton during the two months. The western state registered the highest arrivals of both crops in the country.
The only states with net gains during the two-month period were Haryana and Punjab, where the acquisition of rice, as we mentioned before, is effective with the right infrastructure. However, even in Punjab, farmers selling corn and cotton had to sell their products below the MSP.
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