Demand for law on MSP unwise, can create many complexities: Agro-economist Ashok Gulati

NEW DELHI: Amid ongoing protest by farmers for a law on Minimum Support Price (MSP) law, prominent agro-economist Ashok Gulati has said that MSP as a legal obligation can introduce numerous complexities into the food procurement system and suggested alternative mechanisms such as price stabilization fund to protect the interests of the farming community.

Gulati, a former chairman of the Commission for Agricultural Costs and Prices (CACP), said that the demand is “unwise” and can also have a “damaging” impact on the exchequer.

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Farmers had embarked on ‘Delhi Chalo’ protest earlier this week on the call of some farmer organisations and have continued their agitation. The farmers want a law on MSP for various crops on the recommendations of the Swaminathan panel report.

The panel had recommended that MSP should be at least 50 per cent more than the weighted average cost of production which came to be known as the C2+50 per cent formula. C2 denotes that the cost of production is equal to the paid out cost plus the imputed value of family labour plus the rental value of owned land and interest on fixed capital.

Gulati said that payment of MSP according to this formula is also not “economically viable”. “Policymakers must balance farmers’ interests with consumers’ demands while ensuring inflation doesn’t rise”, he said.

“As far as MSP is concerned, making it a legal obligation can create many complexities in the system. If the supply of a commodity is more than the demand and the price cannot come below the MSP, then nobody is ready to buy (the excess of the commodity)”, he said.

“They (farmers) will have to face that problem which they are not realizing today. They feel everything government should buy. The government cannot buy everything. That’s the problem,” he added.

Gulati, who was a member of the Economic Advisory Council of Prime Minister Atal Bihari Vajpayee and is a distinguished Professor at the Indian Council for Research on International Economic Relations (ICRIER), said the demand for MSP on the basis of Swaminathan panel formula will increase procurement cost.

Referring to C2 plus 50 per cent formulation, he said, “it will increase the cost by 25 to 30 per cent”. “That means MSP will have to be increased by that amount. Now if MSP has to be increased for that amount of food subsidy….it will go by another Rs 60,000 crore or so just for wheat and rice and other commodities will have to be bought and then at what price the government will clear, we have no clue whether it will cost rupees five lakh crore or 10 lakh crore or two lakh crore…”

Gulati, who served as Chairman of CACP (2011-14), said there could be different ways to give some protection to the farmers to deal with market risk.

“There could be a price stabilization fund, you can use that when the situation is in a crisis mode, then the government should come forward to give compensation to the farmers… because this happens every second third year with perishable commodities,” he said.

“You can announce bonus or compensation or PM Kisan. You can announce the price stabilization fund of Rs 25,000 crore to do these operations. So, there are several options that you can do – PM Kisan can be raised from Rs 6000 to Rs 10,000,” he added.

Asked how farmers’ income be doubled in India, Gulati said a farmer requires irrigation, high-yielding seeds, and a market to sell produce. “Government must invest in agriculture research and development, infrastructure, and market opening to increase trust among farmers and boost productivity”, he said. Gulati also said that the government must listen to farmers’ concerns. (ANI)