Saturday, 25 June, 2022
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If we continue to raise MSP, industry will source raw material from international sources

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Thousands of farmers marched in Delhi on Monday, demanding a one-time full loan waiver, fair crop prices and the fulfilment of the Centre’s promises to them. PM Narendra Modi had promised a minimum of 50% profits over the cost of production during the 2014 election, based on the recommendation of the National Commission of Farmers chaired by Prof. M S Swaminathan. In 2015, the Centre dropped the proposal stating it may lead to market distortion.

ThePrint asks: Is the Swaminathan committee recommendation on MSP a practical solution to farmers grievances in India?

The report has suggested a whole range of solutions to improve the foundations of sustainable agriculture, facilitate rural credit and boost farm economy.

Unfortunately, from the whole report, the political class and the farmer’s leaders picked up the most convenient dimension of the increases in MSP because this does not need any serious planning and thinking. This was the easiest way to get political mileage by short-sighted political leaders across the political spectrum with no exception. Earlier it was used by the BJP as opposition to put Congress-led UPA government on the back-foot and now they themselves are cornered on the same issue. This happens when short-sighted political leadership ignores national interest for short-term political gains. They come to power at the cost of the national development agenda.

The most prominent issue is that there is no uniform cost of production in India due to a range of factors including diversified agro-climatic condition, education level, extension services and natural resource management.

The first challenge will be what should be the average cost of production in India? Will all farmers feel happy with this formula? Low-cost producer will get low premium and high-cost efficient producer will get high premium. This is a basic fault in the proposal of the Swaminathan Report recommendation on MSP. This will discourage efficiency and encourage cost escalation.

Here are other sharp perspectives on Swaminathan committee recommendation on MSP :

P. Chengal Reddy: Chief Advisor, Consortium of Indian Farmers Association

Yogendra Yadav: National President, Swaraj India.

Siraj Hussain: Visiting Senior Fellow, ICRIER.

Aruna Urs: farmer-in-residence.

We must move away from MSP per unit price to profitability per unit area. This will help in reducing the cost of production, encourage technology transfer and reduce cost per unit food production and at the same time ensure profitability for the farmers.

If we continue to increase MSP for the farmers, trade and industry will prefer to source the raw material from international sources which are cost effective.

The government, by no means, can buy the whole crop from farmers. This will lead to a serious economic crisis because resources will be blocked and vital sectors like social infrastructure will suffer the most.

Increase in customs duty beyond a limit will isolate India from the world market, and we will not be able to export to earn foreign exchange and domestic prices will further crash. Pulses and paddy example is in front of us. Tariff protection will bring inefficiencies in the system. Our exports will suffer and farmers will also lose marketing opportunity.

Old concepts and old ideologies are not delivering in today’s scenario and this has led to unrest in farmers as well as consumers.

Vijay Sardana is a Commodity Markets & Agribusiness Strategist.

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