Revitalizing Agriculture

Revitalizing Agriculture

                Focus on Agriculture and Farmer’s welfare has been a priority area for the Government. The Budget announcement of fixing MSP for Kharif crops at 50% above the cost of production is seen as a major step towards achieving the goal of doubling incomes of farmers by the year 2022. This announcement has the potential of being the real game changer that will lead to welfare of farmers and increase in real Agricultural GDP. However the question that comes to one’s mind is if it is actually possible to fix MSP at 50% above cost of production without causing major disruptions in food inflation, food subsidy bill as also crop diversification. Some critics have claimed that this is just not possible and this might be an exercise in statistical jugglery without any real benefits accruing to the farmers.

Government of India fixes MSP – Minimum Support Prices for around 26 crops and this is the price that is guaranteed to the farmers. If market prices fall below MSP, Government does procurement at MSP from farmers. MSP is fixed by the Commission for Agriculture Costs and Prices (CACP) which recommends the prices for both Kharif and Rabi crops every year. The fixation of MSP is based on factors like cost of production, changes in input prices, input-output price parity, trends in market prices, demand and supply, inter-crop price parity, effect on industrial cost structure, effect on cost of living, effect on general price levels, International price situation, parity between prices paid and prices received by the farmers and Effect on issue prices and implications for food subsidy. The Commission follows a very complex and detailed mechanism for fixation of MSP. The major items for procurement by Government continue to be Paddy and Wheat as the same is required for distribution through Public Distribution System as per the provisions of National Food Security Act. For 2017-18, MSP for Paddy was fixed at Rs 1590 per Qtl and for Wheat it has been fixed at Rs 1735 per Qtl for 2018-19. In 2017-18, the total Paddy procurement so far is around 425 lakh MTs and the expected procurement is 580 lakh Mts. The total wheat procurement was around 308 Lakh MTs for 2017-18.

            Given the prevalent MSP and the levels of procurement we analyze the ramifications of the policy announced in this year’s Budget. While CACP follows a complex mechanism to fix MSP, the relevant costs for farmers are commonly referred to as A2, C2 and FL. Broadly speaking A2 includes all expenses in cash and kind on account of hired labour, bullocks, machines, seed, Insecticides, Pesticides, Manure, Fertilizers, irrigation charges and miscellaneous expenses. FL refers to the Imputed Value of Family Labour. C2 is the Comprehensive Cost and it includes Imputed Rent and Interest on Owned Land and Capital Respectively along with A2 and FL. To analyze the various costs and existing MSP for various crops we look at the table below:

Crop	A2+FL	C2	MSP	50% above A2+FL	50% above C2
Wheat	817	1256	1735	1225.5	1884
Barley	845	1196	1410	1267.5	1794
Gram	2461	3526	4400	3691.5	5289
Lentil	2366	3727	4250	3549	5590.5
Arhar	3318	4612	5450	4977	6918
Urad	3265	4517	5400	4897.5	6775.5
Rapeseed & Mustard	2123	3086	4000	3184.5	4629
Bajra	949	1278	1425	1423.5	1917
Paddy (Grade A)	1117	1484	1590	1675.5	2226
Safflower	3125	3979	4000	4687.5	5968.5
Jowar (Hybrid)	1556	2089	1700	2334	3133.5
Maize	1044	1396	1425	1566	2094
Ragi	1861	2351	1900	2791.5	3526.5
Moong	4286	5700	5575	6429	8550
Groundnut	3159	4089	4450	4738.5	6133.5
Soyabean	2121	2921	3050	3181.5	4381.5
Sunflower	3481	4526	4100	5221.5	6789
Sesamum	4067	5706	5300	6100.5	8559
Nigerseed	3912	5108	4050	5868	7662
Cotton (Medium Staple)	3276	4376	4020	4914	6564

As per this table the existing MSP for Wheat, Barley, Gram, Lentil, Arhar, Urad, Rapeseed & Mustard and Bajra is already more than 50% over A2+FL. For Paddy, Safflower, Jowar, Maize, Ragi, Moong, Groundnut, Soyabean, Sunflower, Sesamum, Nigerseed and Cotton, the MSP is lower than 50% above A2+FL. However, if the intent of the Government is to give a boost to income of farmers the relevant cost should be C2 as that would only mean a significant policy shift. This would imply a significant jump in MSP – around 8% for Wheat and 40% for Paddy. While it seems to be feasible for Wheat as even for 2018-19, the MSP has been raised by 6.7% and hence if MSP is further raised to Rs 1884 for 2018-19, it will ensure that farmers get 50% more than their cost of production C2. This would require an additional expenditure of around Rs 4590 crores at the current levels of procurement. However for paddy, the jump will be around 40% and this would mean an additional expenditure of about Rs 36888 crores at the current levels of procurement. Thus if the issue prices remain the same, the food subsidy bill will go up by almost Rs 41000 crores. This could be the reason for the increased outlay for Food Subsidy in the Budget 2018-19 of Rs 169323 crores over the revised estimates of Rs 140282 crores for 2017-18 – an increase of Rs 29041 crores. With improvement in efficiency of Food Corporation of India or marginal increase in issue prices which have remained at Rs 2 per kg for Wheat and Rs 3 per kg for Rice, the Food Subsidy Bill can be limited to the Budgetary figure of Rs 169323 Crores. Thus the announcement of the Government of offering farmers MSP of 50% above costs is very much feasible and it seems farmers are in for a big boost. There will be ramifications on food inflation but with a significant section of the population covered under National Food Security Act, it seems both farmers and consumers are set for some good times – Acchhe Din.

Abhishek Singh

( Views are personal) 

What’s on your Mind – Kiphire!!

What’s on your Mind – Kiphire!!

Every morning as I switch on my phone, I have Mark Zuckerberg’s Facebook staring at me with the question – What’s on your mind!! As we bid good bye to 2017 and heralded 2018 – when most of my friends and family wished a Happy New Year for me and my family – my mind was more occupied with Kiphire – one of the remotest districts in the extreme North East of India. Kiphire is around 2500 kms from New Delhi and it takes almost 18 hours to reach the district from Delhi with the fastest mode of transport – a combination of a 4.5 hour flight to Dimapur and another 13.5 hours of tiring road journey on the hill roads.

               Towards the end of 2017, I got a call from the young Deputy Commissioner of Kiphire with the news that his district has been identified as one of the most backward 115 districts of the country which have been chosen for a special focus by the Prime Minister for Transforming India. He also informed me that he has been invited to participate in a Conference in New Delhi on 4^th and 5^th January where the District Collectors (Deputy Commissioners) of the 115 most backward districts will be making presentations before a panel chaired by none other than our Prime Minister. He asked for my suggestions on the theme that he should chose for Kiphire – from amongst Education, Health, Nutrition, Agriculture, Water Resources, Financial Inclusion, Skill development and Basic Infrastructure. We discussed the various development indicators for the district and the Deputy Commissioner was preparing for his big Day with the PM. However, this was in the last week of 2017.

               Come 2018 and a different kind of crisis awaited the DC and the district of Kiphire. A potentially explosive law and order situation over nomenclature of a village and we had a situation where the focus shifted from development to maintenance of basic law and order. Social Media these days is a willing medium to be misused for spreading all kinds of rumours that can disrupt normal life. So a decision had to be taken – much to the chagrin to champions of free speech – to restrict Internet services in the district. Meetings were held with all stakeholders to avoid any loss to life and property. With great effort, the situation has been brought to control and normalcy prevails as of now. But at what cost? The Deputy Commissioner could not attend the Conference which was addressed by Hon’ble Prime Minister. The Prime Minister exhorted the young District Collectors – referred to them as Change Agents – who can together transform the Backward Districts to be Aspirational Districts. Identifying the aspirations of the people of these districts and taking steps to meet those aspirations can help not only transform these districts but the entire State. The Deputy Commissioners – the Change Agents – who have the opportunity to work in these Aspirational Districts are fortunate to get an opportunity to do something meaningful – that can bring about real change. The Prime Minister called upon the young officers to strive hard to change the negative psyche and mindset of pessimism into that of optimism in these districts.

Given this context, we need to go beyond the dispute and the acrimony of the past week – look for ways and means to resolve our differences and work together – hand in hand – to help improve the development indicators of Kiphire. The literacy rate of the district is 69.54% against 79.55% for the State. The Sex Ratio of the District – 956 is better than that of the State – 931. But the sex ratio of children below the age of 6 is only 948 and that’s a trend that needs to be reversed. Poor infrastructure facilities in the districts results in a situation where we don’t have sufficient teachers in schools and colleges, doctors in hospitals are missing and people suffer as a result. Bad roads and lack of proper infrastructure is one of the biggest bottlenecks in the district. Coverage of Banks is limited and Financial Inclusion is a major challenge. With the relatively young population, Skill Development can be a major focus area to help the youth find jobs. The Prime Minister has given a target of 3 months to work out a plan and move ahead – this will be challenging and what we need is to get all like minded people – specially the youth – who are aspirational to come forward and give suggestions that can help transform Kiphire. If we can do this, there is an opportunity to make Kiphire the role model for the Nation. And this would ensure that Kiphire will be on the minds of people across the country, next year – for a totally different reason. Lets do it.

Abhishek Singh

(Views are personal)