Farmers' 'Delhi Chalo' march begins; here's why farmers want Swaminathan Commission's MSP formula

Farmers from Punjab, Haryana and Uttar Pradesh have begun 'Delhi Chalo' march demanding legal guarantee on MSP for all crops and implementation of the Swaminathan Commission's formula. The farmers are also advocating for full debt waivers, pensions for farmers and laborers, and the withdrawal of cases stemming from the 2020-21 protests.

While the Union Agriculture Minister Arjun Munda emphasized the need for further dialogue, SKM (non-political) which is leading the protest has said that the government is not serious on any of their demands.

Legal Guarantee on MSP

The MSP is a minimum price guarantee that acts as a safety net or insurance for farmers when they sell particular crops. These crops are procured by government agencies at a promised price to farmers and the MSP cannot be altered in any given situation. MSP, which is an important concept used to boost the farmer's income finds no mention in any law. While the government does declare the MSP twice a year, there is no law, making MSP mandatory.

A legal guarantee on MSP, that would bound the government to procure all crops at the minimum support price remains the primary demand of farmers.

Swaminathan Commission's formula

Many farmers also advocate the implementation of Swaminathan Commission's formula for determining the MSP. The national commission on farmers, headed by Swaminathan, had submitted five reports - the final one on October 4, 2006 - focused on cause of farmer distress and rise in farmer suicides. He had recommended addressing these issues through a holistic national policy for farmers

The Swaminathan Commission had recommended three variables to determine the production cost.

• A2: These are the out-of-pocket expenses incurred by farmers including loans for fertilisers, fuel, machinery, irrigation, etc. and cost of leasing land.
• A2+FL: This is the estimated value of the unpaid labour for harvesting crops such as contribution of family members and others. It is in addition to paid-out cost.
• C2: Comprehensive Cost (C2) is the actual cost of production as it takes into account for rent and interest foregone on the land and machinery owned by farmers, in addition to the A2+FL rate.

As per the Commission, the ideal formula to calculate the MSP would be:

MSP = C2+ 50% of C2

By this, the Swaminathan Commission recommended that the MSP should at least be 50% more than the comprehensive cost.

Current MSP formula

The government currently maintains that the MSP is 1.5 times of A2 (out of pocket expense)+FL(Unpaid labour expense). By this, the rent and interest on the land and machinery owned by farmers are excluded. The farmers are demanding that the 1.5-times MSP formula should be applied on the C2 (comprehensive) costs.

Considering this, the Government in March 2020 stated that the Production Cost is one of the main factors to determine the MSP and the Commission for Agricultural Costs and Prices (CACP) considers all the costs in comprehensive manner.

The CACP considers both C2 (Comprehensive cost) and A2 (out of pocket expense)+FL(Unpaid labour expense) costs to determine the MSP. CACP considers the A2 (out of pocket expense)+FL(Unpaid labour expense) formula for return and C2 (Comprehensive cost) formula as a benchmark reference costs to make sure that the MSP covers the production cost.

For instance, if the recommendations are followed the MSP for wheat, which is the main Rabi crop, would be Rs 2,478 per quintal as opposed to Rs 2,275 as per the Government's formula. So with the Swaminathan committee’s formula, the farmer would end up making Rs 203 more per quintal of wheat.