MSP won’t bankrupt India. It’s complex, but so is disinvestment

Debunking six myths about the MSP for BJP and allies, free-market wallahs and ecological warriors. Yogendra Yadav in The Print 


 

A spectre is haunting India’s ruling class – the spectre of MSP. Over the last few days, various sections of this ruling class – political allies of the Bharatiya Janata Party, economic ideologues of free-market and some ecological warriors – have entered into an unholy alliance to exorcise this spectre and stymie the possibility of India’s farmers getting a fair price for their produce.

Ever since Prime Minister Narendra Modi’s dramatic, though over-delayed, capitulation on the farm laws, the fear of the ascent of the rural has left the Indian bourgeoisie petrified. Minimum Support Price (MSP) is now the new battleground. End of “reform” – arguably the most abused word – is the latest war cry. Ever since the Samyukta Kisan Morcha (SKM) has reminded the PM of its pending demand of a legal guarantee of MSP, we have witnessed a flurry of articles, editorials and debates out to block the possibility that the PM may concede this one as well. MSP is the “bane of agriculture” and the demand for its legal status “totally unreasonable” says the 50-word editorial of The Print, which I often agree with.

As in much ideological propaganda, this tirade against MSP is full of ignorance, prejudice, and fabrications. I cannot imagine such ill-informed canard getting space on national media if it concerned share market, Provident Fund, debt restructuring or anything that touched upon the interest of the “middle class”.

As this historic farmers’ struggle enters end-game, it is vital to debunk some of the misinformation and disinformation that surrounds the current debate on MSP. 
Farmers shifting goalpost?

The first lie is an accusation: Farmers are shifting the goalpost by inventing the demand for legal guarantee of MSP once the demand for repeal of three agricultural laws was conceded. This is nonsense, contrary to the well-known and widely publicised position of the SKM. Demand for MSP realisation has been prominent on the charter of demands, next only to the repeal of three laws, at every stage of this struggle, from the very first memorandum to the 11 rounds of negotiations and the Kisan Sansad. The government’s power-point response to the SKM’s demands acknowledged this issue. This has been one of the main demands in the public domain, reiterated in almost every public speech. There is nothing new or surprising about it. Assured remunerative price has been a flagship demand of the farmers’ movement for decades.
‘MSP already exists’

The second lie is plain and simple: MSP is already available. So, why bother about legal status? Sadly, the PM’s rhetoric of “MSP tha, hai aur rehegi” has given fresh lease of life to this myth. The truth is that MSP has existed mostly on paper. The government’s own data shows that only 6 per cent farmers actually benefit from it. (I think a realistic number is around 15 per cent). That is why, over the years, farmers, movements have made three demands.

We can call these three components of the demand for MSP. One, the promise of Minimum Support Price should have a sound statutory status, instead of remaining just an executive order. (A working group of Chief Ministers headed by Narendra Modi recommended this component to PM Manmohan Singh in 2011. The Commission for Agricultural Costs and Prices also reiterated this demand in its 2017-18 report.) Two, the government should make good this promise by creating a well-funded and effective administrative mechanism that ensures that every farmer actually received at least this minimum price for her entire produce. (Successive governments, including this one, have repeatedly promised this without putting such a mechanism in place). Three, there should be a fair and comprehensive method of computation of MSP that takes full cost into account and is extended to all agricultural produce. (This was recommended by the Swaminathan Commission). All these three asks remain unfulfilled to this day.

 
Environmentally unsustainable?

The third lie is presented under an ecological garb: Legalisation of MSP would lead to over-production of water-guzzling paddy and delay the much-needed diversification of crops. This reasoning is fallacious: The over-dependence on paddy (and sugarcane for that matter) is not because of generous MSP, but because of skewed procurement. While the government declares MSP for 23 crops, it makes good this promise only for wheat and paddy, and that too in select states. No wonder all farmers in these states are hooked to these crops that are not environmentally sustainable. The solution does not lie in withdrawing MSP, but in making sure that the farmers realise MSP in other crops like chana, makka, bajra and various dals. The government should offer attractive MSP for pulses (as recommended by the Arvind Subramanian committee) and oilseeds and ensure their purchase.
Will it distort the market?

The fourth lie is dressed up as elementary economics: Any tinkering with prices by way of MSP would distort the market. Yes, it would, just as TRAI regulations distort telecommunication market, just as ban on surge prices distort road and air transport market. Ever heard these free-market wallas complain against these distortions? Do we not fix minimum wages lest they distort labour market? Should we allow aspirin to be sold for Rs 1,000 per tablet? As for the fear of food prices going up, the way to control it is to offer subsidised food to the poor, not to deny fair price to the producer. The fact is that “free market” is and must be regulated all over the world to meet overall societal objectives. Farmers are offered subsidies and price support all over the world. If price assurance is a bad idea, why declare MSP in the first place?

Impossible for govt?

The fifth lie takes bureaucratic form: MSP may be a good idea, but it is practically impossible. How can the government purchase all the produce of all the 23 crops? Where would it be stored? What would the government do with it? Or so goes the argument. The simple response is: No government needs to do something as silly as that in order to ensure that all farmers receive MSP. My colleagues and I have repeatedly argued that there are multiple methods for ensuring MSP to all farmers. The government can procure more than it does today, especially in pulses, coarse grains, and oilseeds. For the rest, the governments need not purchase. The farmer can be given deficit payment for the gap between the MSP and market price, as was done by the Haryana government this year for bajra. Government can do selective intervention in the market, or use protectionist policies in international market, to prevent prices from falling. And, in the last instance, it can use punitive measure to disallow trading below MSP. All this is complex, yes. But developing a mechanism for MSP delivery is no more complex than designing disinvestment or drawing up mining contracts.
Will India go bankrupt?

Finally, the fiscal lie: India would go bankrupt! My colleague Kiran Vissa and I had debunked this fear-mongering by presenting a rough estimate, with complete breakdown, of how much would it cost the government to make up for the gap between the existing MSP and the prevailing market price. Our calculation for 2017-18 showed the overall cost to be Rs 47,764 crore (just 1.6 per cent of the Union Budget that year and less than 0.3 per cent of the GDP). If the MSP were to be raised to the level recommended by Swaminathan Commission, it would still cost Rs 2.28 lakh crore (about 7.8 per cent of Budget and 1.2 per cent of GDP). Can India afford it for the welfare of nearly two-thirds of its population? That is the real question that the country must face.

Thanks to this historic farmers’ movement, the country has woken up to a political reality: Farmers do not belong to the dustbin of history, they are very much a part of India’s present and future. A legally binding system of fair calculation and effective delivery of MSP to each farmer is a logical corollary of this realisation. As A.R. Vasavi says, it’s time to move towards “Maximum Support Policy”. It is all about political will now.

I am beginning to dread Mumbai

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Shantanu Bhagwat in The Times of India

My favourite city when I was growing up has today become a place that I try hard to avoid. The reasons are not hard to find. Lack of an efficient system of public transport tops the list. Add to this, the traffic snarls. To this, add a humid climate and uncontrolled, chaotic crowds that jostle for space with shops, scooters, buses & cars.

Don’t get me wrong. There are still many things that keep me hooked on Mumbai. The spirit of enterprise, the numerous eating joints, the real feel of a cosmopolis and the walk along Marine Drive – to name just a few. But all these are increasingly overshadowed by my dread of being stuck in an endless traffic snarl or missing my meeting (worse, a flight) or having nowhere to go for a walk if I feel like unwinding after a long day.

Mumbai’s problems are not unique. At their core is the utter failure of government and administration to deal with rapid urbanisation that is happening across the length and breadth of India.  This urbanisation is the reason for Guwahati losing its charm. This urbanisation is the reason Delhi is fast becoming a cold, ruthless city seething with rage. It is what long-term residents of Pune dread. And it is the reason Bengaluru’s distances are now calculated in “hours” rather than kilometres.

To get a sense of the magnitude of the challenge we face, sample this:

• Over 32% of Indians living in major cities still live in single room homes. In most Tier-I cities, “Affordable Housing” remains a pipe dream.
• Almost no Indian city has water coming through the pipes that is safe to drink. Waste disposal remains a common problem across towns and cities in India
• Sometime between now and the next 10 years, 3 Indian cities will be among the fastest growing cities world-wide. These are Ghaziabad, Surat and Fardiabad. “Twenty-two other Indian cities (will) also find a place in the top 100”. 
• In Delhi, over 350 kms of nullahs (storm water drains) built hundreds of years ago now carry untreated sewage posing a grave risk to public health & environment 
• On an average, 10-12 people die every day on the tracks of Mumbai’s suburban rail system. That is almost 4000 people each year. This has been going on for several years 

And finally this statistic which I doubt would surprise any of you: almost 50% of the population in most cities live in slum-like conditions.

About 3 years ago, I visited one such area in Mumbai. Situated within minutes from the famous RK Studios in Chembur, this area is called Cheetah Camp. Cheeta Camp is unusual because it is a “planned slum”. But the planning does not extend to sewers or basic provisions.

A recent study discovered that the 117,000 residents of Cheeta Camp have just 38 usable toilets among themselves. That means roughly one toilet per 170 people. To understand what this means, take about 30-40 families in your neighbourhood. Now imagine all of them coming to your home to use our one toilet.   I think you get the picture.

Believe it or not, we actually have a “Ministry of Urban Development” with a cabinet rank minister in charge. The minister in charge is the redoubtable Kamal Nath – a man tagged with the “15% label” by Tarun Das, former Chief Mentor, CII and alleged to  have offered “jet airplanes as enticements” to  get support from MPs for the India-US civilian nuclear deal in 2008. 

Sadly the Ministry appears to have achieved little.  The Minister himself has publicly said, “We are not building for the future, unlike Hong Kong and Singapore. We are still catching up with the past” 

And his own Ministry’s survey on the state of affairs in our cities has highlighted glaring failures, including the fact that, “more than half of India's cities have no piped water or sewerage systems, four in five had water for less than five hours per day and seventy per cent households across the states had no lavatory.”  Not only has the Ministry failed to achieve much, it has been dragged into the murky CommonWealth Games Scandal too.

Unfortunately urbanisation is a dull topic for prime time TV. It does not arouse the kind of passion that can get people out on the streets. For most well-read, educated Indians whose stomachs are full, urbanisation is an inevitable “evil” that is ruining their towns and cities. It is the “evil” that is making water scarce; making groceries expensive, commuting a nightmare and jeopardising the safety of their children.

There is little realisation of the long-term implications of this “problem”. It seems most of us assume the challenges of “urbanisation” will be resolved on their own.

But we ignore urbanisation at our own peril. I believe, more than anything, dealing with the effects & impact of rapid urbanisation will be India's biggest challenge in coming decades.