By Arsh Rampal
The latest budget relies a lot upon the NITI Aayog to implement policies. The government think-tank has been given the task to implement a mechanism to ensure farmers get adequate price for their produce. The Finance Minister Arun Jaitley has said that NITI Aayog will work with states in finding ways to ensure that farmers get the Minimum Support under all conditions.
What is the Minimum Support Price plan?
The Minimum Support Price (MSP) is the guaranteed price provided by the Central government to farmers. This price is provided to farmers even in cases when the market price of a product is less than MSP. It has been long demanded by farmers that MSP provided should be increased. The Finance Minister in the annual budget announced that MSP will be set as 50% over the cost of production. The MSP will now cover 23 notified crops.
The finance minister has ensured that farmers will reap the benefits of the new MSP scheme. The details regarding the final implementation of the scheme have not been finalised. The NITI Aayog has been tasked with coming up with a plan for implementing the scheme. One of the ways in which the policy can be implemented is by nationally implementing Madhya Pradeshs Bhavantar scheme. The other possible way of implementing is through direct procurement of crops.
Implementing MSP efficiently
The first way to implement the MSP scheme is by direct procurement. Under this plan the Central government will provide financial assistance to States. The States are then required to develop infrastructure by which the crops can be procured by the Government. This plan would take a lot of time to be completely implemented. The development of infrastructure in all states will also be a financial burden in its implementation.
The plan the government is most likely to adopt is the Bhavantar Scheme of Madhya Pradesh. Bhavantar literally means deficit price. Under this scheme, the government pays the difference between MSP and market prices to the farmers. Since the money reaches the enrolled farmers directly, the finances needed to implement the scheme would be lesser than that for direct procurement.
The policy implemented in Madhya Pradesh in October 2017 works on two levels. For fair and average quality produce, the difference between MSP and modal prices is given to farmers. For produce that is below fair and average, the government pays the difference between modal prices and the actual price received by farmers.
Calculation of MSP
The MSP as per the new budget will be 1.5x times the Cost of Production. The 2018-19 annual budget, however, is silent as to how the cost of production will be calculated. The two possible ways in which it can be calculated are the C2 method or the A2+FL method. Farmer organisations have demanded that the C2 method be used to calculate the cost of production.
The A2+FL measure of the cost of production includes paid out costs on inputs plus an imputed value of family labour. The C2 method is a comprehensive way to calculate the cost of production. It includes imputed rent and interest on owned land capital. It is higher than A2+FL and thus is less likely to be used in the scheme.
Roadblocks to effective implementation
The government may have announced a higher MSP for farmers however a large number of farmer organisations and experts feel that the fund allocated for agriculture will not be enough to implement the scheme. The higher MSP also does not tackle the previous implementation problems of the MSP Scheme.
The Bhavantar scheme itself is also riddled with several problems. In Madhya Pradesh, traders have started to use the scheme to buy crops at cheaper rates from farmers. The below fair and average quality tier of the scheme also does not completely fulfil the promise of the MSP scheme. Implementing the policy nationally as it is can prove to be detrimental to the farmers.
As the NITI Aayog is yet to come up with the plan, the actual date of implementation of the scheme is also in question. It is unlikely that the farmers can claim the benefits of the scheme for at least 2 years.
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