Jaitley clarifies on cost parameter to calculate MSPs to be paid to farmers -Sayantan Bera


The finance minister’s clarification that the government will use the A2+FL measure to determine MSPs for crops is likely to disappoint farmer organizations

Finance minister Arun Jaitley said on Friday that farmers would be provided 50% returns over and above what they spend on inputs such as seeds and fertilizers and an imputed value of family labour, clearing the confusion over which measure of cost of cultivation would be used to decide minimum support prices (MSPs).

“We will follow this as a matter of principle and this will set a rule for future governments and a new benchmark for farmers,” Jaitley said in the Rajya Sabha during a discussion on the budget.

The Union budget presented on 1 February had promised that the government would fix MSPs at 50% over cost, acceding to a major demand of farm organizations following months of farmer protests seeking remunerative crop prices. However, it did not clarify which measure of cost would be used to decide MSPs.

The Commission for Agricultural Costs and Prices (CACP), which recommends crop support prices to the government, uses two measures—A2+FL, which includes paid-out costs on inputs plus an imputed value of family labour, and C2, or comprehensive cost of cultivation. To arrive at C2 costs, imputed rent and interest on owned land and capital is added to A2+FL.

The finance minister’s clarification that the government will use the A2+FL measure is likely to disappoint farmer organizations, which were demanding MSPs at 50% over C2.

A comparison of A2+FL and C2 costs with MSPs announced in January for major winter crops such as wheat, mustard and chana shows that net returns to farmers were lower than 50% when C2 costs were used, while they were significantly higher than 50%—ranging from 79% to 112%—when A2+FL costs were used.

This implies that farmers are already receiving 50% returns over costs for most crops when the A2+FL measure is used, and the budget announcement may not translate into higher returns.

“The current crisis of farming needs real measures to address low prices and the government is deceiving farmers... even the previous United Progressive Alliance (UPA) government’s MSP announcements gave significant returns over A2+FL costs for many crops, and the prime minister had criticized this in his election campaigns (in 2014), promising better returns to farmers,” said Kavitha Kuruganti, convener of the Alliance for Sustainable and Holistic Agriculture, a farm policy advocacy group.

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Livemint.com, 10 February, 2018, http://www.livemint.com/Politics/FnKHM55nYFqANgSpWTlRrJ/Jaitley-clarifies-on-cost-parameter-to-calculate-MSPs-to-be.html

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