The Great MSP Hoax – Minimum Hike, Maximum Noise

In North India, there is a saying: “thotha chana, baje ghana”. That means, a rotten gram seed rattles the most. This is what is happening with this year’s Minimum Support Prices (MSP) for the rabi or winter crops, which were announced by the government on September 21. The announcement has been turned into a propaganda blitzkrieg to counter the eruption of anger among farmers across the country over the three laws on agricultural ‘reforms’ that were presented to Parliament earlier, two of which were passed amidst pandemonium in the Rajya Sabha on September 20.

Cornered over the new laws, which seek to hand over agricultural production, trade, storage and pricing to the whims of big traders and corporates, the spin-masters of the government typically thought that they could use the routine announcement of MSPs to divert the anger of hapless farmers.

Prime Minister Narendra Modi himself described the “higher MSP” as empowering the farmers and contributing to doubling their income. The government’s propaganda arm, the Press Information Bureau, said that these “relatively higher” MSPs along with other steps taken by the government would help meet nutritional requirements and “achieve self-sufficiency”. Sambit Patra, the national spokesperson of the ruling Bharatiya Janata Party tweeted a chart showing how much the MSP had increased under Modi’s rule. Various ministers, MPs, chief ministers and leaders of BJP continued the clamour of praise.

So, let us have a closer look at the new MSPs.

One of The Lowest Hikes in Years

As the chart below shows, this years rabi MSPs are among the lowest in recent years. Wheat MSP has been increased by a mere 2.6%, from Rs.1,925 per quintal (100 kg) to Rs.1,975. That’s an increase of Rs.50 per quintal or 50 paise per kilogram. It is the lowest increase since the Modi government came to power in 2014. Yet it is being spun out as an “empowering” move that will pave the way for prosperity. Remember that wheat is by far the biggest rabi crop. Last rabi season (2019-20), the country produced nearly 108 million tonnes of wheat – a record.

Gram also has seen the lowest hike in recent years while barley (jau in Hindi), lentil (masur in Hindi) and rapeseed/mustard have seen the second lowest hike.

In the current crisis, when the COVID pandemic is stalking the land, normal economic activities are severely restricted, and the economy is in a tailspin, it would have been logical and justified to provide a much bigger hike in MSPs so that farmers get some buying power in their hands, thus boosting the whole economic system. Yet, the Modi government has again turned this into a gimmick of less substance and more showmanship.

Lies to Back the Hoax

That’s not the end of the matter. The government also claims that the hike is “in line with the recommendations of the Swaminathan Commission”. That’s a blatant deception, one that has been perpetuated for many years.

The National Farmers’ Commission, headed by the agricultural scientist M.S.Swaminathan, had recommended in its voluminous report that MSPs should be fixed at 50% more than the total cost of production. What the government has been doing is a sleight of hand: it has redefined the ‘total (or comprehensive) cost of production’ by excluding some key factors from its calculations. These excluded costs are imputed rental on own land and imputed interest on capital goods owned by the farmer (excluding land). The “modified” cost has been used as the base or “cost of production”. It is lower than the actual cost by about 30-40% depending on the state one is referring to. Thus, 50% more than a reduced ‘total cost’ is much less than the actual price they need to give.

This year’s comprehensive cost for various costs has not been published by the Commission on Agricultural Costs and Prices (CACP). So, a comparison between it and the actual MSP cannot be made. But data on previous years is available and can be seen in the chart below for wheat.

For last year’s rabi marketing season (2020-21), the comprehensive cost of production (C2) was Rs.1,425 per quintal. If MSP is to be 50% more then it should have been Rs.2,138 per quintal. But actual MSP last year was Rs.1,925 per quintal. That’s a loss of Rs.213 per quintal for farmers. Yet the government goes on claiming that it has implemented the Swaminathan Commission recommendation!

MSP Hikes During Modi Years

Sambit Patra has tweeted a chart showing how much increase there has been in MSPs of various rabi crops under the Modi regime. The unsaid implication is that these increases are magnificent and show the Modi government’s farmer-friendly approach. A closer look, however, reveals that these increases are just about keeping up with yearly increase in input costs. The farmers are not getting progressively better prices – they are at a standstill.

Take the example of wheat. Since 2014, the MSP has cumulatively increased by about 41%. If you compare with the ‘modified’ C2 cost of production that the government is using as a base every year, it can be found that this cost too has increased by precisely the same quantum, about 41%!

So, the Modi government has not given anything extra to farmers. In fact, the Modi government gave a hefty hike only in 2018-19 because general elections were going to be held in 2019 May-June. They wanted farmers to be ‘happy’. Otherwise in most of the years, the hikes have been even less than the increase in costs.

It should be remembered that these past few years have seen a deadly stagnation in agricultural wages which have barely increase in over four years. Since this is one of the costs that the farmers bear, there has been hardly any increase on this count. Most of the increase is in other input costs, like electricity or diesel (for gensets) or fertlisers and pesticides etc.

Not to forget that we are not even considering the actual comprehensive cost (C2) which has seen much higher increases because of rental value of land increasing at a higher rate.

Hoax Will Be Fought by Farmers, Working People

On September 25, a countrywide protest is going to be held by over 350 farmers organisations under the joint platform of All India Kisan Sangharsh Coordination Committee (AIKSCC). This is being supported by 11 major central trade unions and scores of independent federations, as also people’s organisations from all walks of life. Anger is building up at the dire economic distress faced by the people, and the Modi government’s relentless drive to destroy all protective and regulatory mechanisms (like labour laws) to allow unbridled exploitation by domestic and foreign corporates and big traders. This discontent is simmering and will soon be challenging the Modi government on the streets and in the fields.