The Aryavarth Express
Agency (New Delhi): Demand for a law guaranteeing MSPs for crops in markets has once again surfaced with renewed farmers’ agitation. Of late, several articles in news media and TV debate about the dangers of providing a legal sanctity to the Minimum Support Price (MSP).Economists like Dr Ashok Gulati and Dr Ramesh Chand are major proponents of this argument. They argue that the purchase of all crops (23 of them) at guaranteed MSP would drive the government to bankruptcy and leave little money left in the budget for infrastructure and development.
Farmers reviving the agitation for guaranteed MSP and other demands complain that this is an implementation problem. They say the announced MSPs are notional, as government procurement is limited and the majority of farmers in various states are often getting prices quite below the MSPs in markets. Hence farmers demand a law legally guaranteeing the purchase of 23 crops at MSPs across the country in markets.
Will the guaranteed MSPs drive the government finances to go bankrupt? Let us examine the case.
As per a report by Business Today the total value of all agricultural produce in 2020 is Rs. 40 lakh crores. This however includes dairy, meat, sugarcane, cotton, and other minor crops. The value of cereals that is paddy, wheat, and maize that enter the market is valued at around seven lakh crores or eight lakh crores. It may not be necessary for government agencies to buy every grain produced by farmers. As Legal MSP to Lessen Corporate Encroachment most small and tenant farmers (owning less than one ha of land), keep aside nearly 30 percent of produce for family, and seed needs, and nearly 74 percent of harvested 23 crops enter the markets. With the assurance of legal guarantee (price above MSP), government agencies are not purchasing what all grain brought to markets but ten percent. Backed by a legal guarantee, this is sufficient to raise the price benchmark above the MSP in open markets. This will stabilize markets and private traders will be bound to purchase at the raised market price.
Many economists opine that the extra cost for the government is only an additional Rs 47,764crores (2017-18 data) if the legal guarantee is provided.MSP of a crop should not be treated as a “reserve price, “below which no trade is allowed legally. As guarantee law assures prices are regulated in the market and does not mandate the government to purchase market surplus or every grain. The government buys regularly quantities required for PDS (public distribution system) distribution under the Food Security Act. In the end, the government will get back later more than two-thirds of purchased expenditure from PDS and buffer stock sales in the market.
Economists and news media supporting NITI Aayog’s government version claim the expenditure is too big and burdensome and simply leaves the government with no money for infrastructure building, defense, and other needs. Extra expenditure of Rs. 10 lakh crores (inflated figure by the government).They further argue, simply derails the economy at a time when the nation is aspiring to reach a five trillion-dollar economy. In reality, as shown above, the extra expenditure for stabilizing prices in the context of legal guarantees will not exceed Rs 74 to 80,000 crore rupees.
The argument that the government will have to procure all the produce that enters the market and may go bankrupt is unscientific and fallacious. Market intervention when they get overheated is not new. The intervention of RBI to regulate FOREX reserves or to cool prices when steel is dumped from overseas is not new.
Of the Rs 5.2 lakh crores, required from public expenditure government is already been spending on crop procurement by FCI and other government agencies of Union government. The rest of the extra expenditure can be met through three sources of public finance.
Withdraw undue reduction in corporate and wealth taxes given to rich industrialists during the last decade. Corporate tax reduction should be restored to 33 per cent (currently at 27 per cent) and income tax to 29 per cent (currently 22 per cent after reduction). Note that as per data in the Union budget presented by the finance minister, shares of Corporate and income tax in Gross Tax Revenue make up 27per cent and 29 per cent respectively. By readjusting, an extra revenue of nearly 4.5 lakh will be available which can be readily used to meet guaranteed MSP expenditure. Impose tax on individuals whose wealth exceeds Rs 10 crore.
Rise the Statutory Liquidity Ratio (SLR) of public sector banks to meet the funds required to guarantee MSP expenditure. Similar arguments were raised when MNREGA rural employment or the Food Security Act for PDS were introduced during previous UPA governance. Subsequently, the results were proven felicias as stress from rural employment and price rise was alleviated. The provision of crop prices above MSP will provide some relief to debt-ridden small farmers and put some money into their pockets. Production incentives and tax discounts (Rs 2.5 lakh crores for the former and drastic cuts in corporate and wealth taxes) to big industry, did not result in private investments or job creation. The fiscal benefits were not invested to expand manufacturing and new job creation and were invested by capitalists in speculative share markets to boost their profits.
Unlike corporates, any extra money derived from crop sales a small farmer immediately enters the market and enhances demand. They invest more to buy crop inputs, bicycles, or on daughter’s marriage ceremony. The increased demand in turn improves manufacturing and improves the health of the economy.
The provision of guaranteed prices for pulses, millets, and oil seeds imparts confidence in farmers and they move away from rice wheat monoculture by cultivating other crops as well. This not only provides nutritional security to rural India but also brings an array of ecological benefits such as restoration of groundwater levels, paddy straw burning, less pests and diseases apart from a decrease in the use of chemical fertilizers and pesticides.
Apart from the scientific calculation of crop MSPs Swaminathan Commission report has recommended important socio-economic measures to raise rural incomes, land reforms, food and nutritional security, old age pensions, sustainable farming, and other environmental proposals. Legalizing MSP is just a temporary relief to small farmers and these other recommendations must be addressed in combination immediately to alleviate small farmer stress and increase food production thereby attaining universal food security through PDS.
Corporate encroachment of agriculture (input supply, production, credit, cut in subsidies, E-Nam markets, and food market value chains) is the primary cause of small farmer distress. The three farm laws introduced by government in 2020 were part of corporate encroachment into small farmer agriculture. Besides corporate farming, lifting a ban on private mass storage of produce, and surrendering to WTO sanctions on subsidies are directly aimed at handing over total food production to domestic agribusiness and imperialist global grain traders.
In the current negotiations between agitating farmers and Union government a new proposal is to contract the purchase of pulses and other crops at fixed prices for the next five years. Farmers in Punjab, for example for the last 15 years had a bitter experience of contract purchase agreements entered with Pepsi company for potatoes and tomatoes. Against the terms of the contract agreement, farmers were often denied the original contract price on the grounds of lack of demand or inadequate quality. Similarly, the new proposal of Contract crop purchase (without consideration of guaranteed MSPs) is yet another jumla (ploy) by the government to deceive farmers just before the Lok Sabha elections.
Farmer agitations for guaranteed MSP law and other demands will help to provide certain relief to distressed farmers. However, farmers and workers should continue to fight against corporate encroachment into agriculture, food markets, and public assets. But the final objective of this united struggle should be the liberation of toilers from the exploitation of domestic capitalism and global imperialism and the attainment of public ownership of means of production possible under socialism. (IPA Service)
By Dr. Soma Marla