Minimum Support Prices (MSPs) of Agricultural Commodities plays crucial role in economic conditions of farmers. Methodology adopted in fixing MSPs for various commodities has been under criticism from all quarters particularly farmers organizations and farmers. With a view to study above aspects Prof. Y.K. Alagh Committee was constituted by Agricultural Ministry, Government of India (GOI) on May 7, 2003. The Committee submitted its report on May 31, 2005. After a long wait of 4 years the GOI rejected crucial recommendations on January 15, 2009. This Article analyses evolution of Costs of Cultivation Scheme (CCS), deficiencies in collecting production costs at grass root level, methodology adopted in fixing remunerative prices to Agricultural Commodities, role of CACP, repercussions in rejecting crucial recommendations and related matters.

EVOLUTION OF MINIMUM SUPPORT PRICE (MSP) SCHEME. India inherited a stagnant agriculture at the time of independence in 1947. The planning frame work initiated in 1950 governed the policy to boost growth in agriculture. The first three year plans concentrated largely on agrarian reforms which provided the momentum for growth of agriculture. The increased production and supply of wheat and rice facilitated the traders to play market tricks. In simple economic terms, when ever production and supply increases the prices of any commodity will decline. At that time the GOI initiated series of market intervention strategic plans to protect farmers’ interest by ensuring remunerative prices for farm produce. As a part of market intervention strategy, the GOI introduced the scheme of MSP.
It was in 1964, the Government of India (GOI) had setup a committee under the chairmanship of Shri. L.K. Jha, the then Secretary to the Prime Minister (P.M.) on 1st August, 1964, to advise the Ministry of Food and Agriculture (now the Ministry of Agriculture) on determination of the prices of paddy and wheat. The domain of coverage of crops was expanded to coarse cereals also. The committee was asked to advise on such prices, which were fair and economical. Later, to institutionalize the system of determination of fair and economical prices of various agricultural commodities on continuous basis, the GOI decided to set up a permanent body, called Agriculture Price Commission in 1965. It was renamed as the Commission for Agricultural Costs and Prices (CACP) in 1985.
The policy of the GOI to announce Minimum Support Prices (MSPs) of various crops necessitated to have data on structure of costs and the cost of cultivation/cost of production. To meet such a requirement of the data on costs, it was felt necessary to work out estimates which provide uniformity in the concepts and methodology across the States. Thus, the data on cost estimates on a continuous basis in respect of all major crops were found highly inevitable. Taking cognizance of such a need, the Standing Technical Committee under the Chairmanship of Dr. Ashok Mitra recommended in 1967 to launch a “Comprehensive Scheme for studying the cost of cultivation of Principal Crops in India” (CS Scheme). In pursuance of this recommendation, the CS Scheme was initiated by the Directorate of Economics & Statistics (DES), the Ministry of Agriculture during the year 1970-71 as a 100% Central Sector Plan Scheme. Since then, the scheme has been continuing in as many as 19 major states (Including three newly carved out States of Chattisgarh, Jharkhand and Uttranchal) without any interruption. The DES is overall responsible for collection, compilation and collation of data pertaining to the cost of cultivation and cost of production of various crops in different States. On the basis of data received from various Implementing Agencies, the DES generates the estimates of cost of cultivation/cost of production and furnishes the same to CACP for use in price policy recommendations.
Initially, the Scheme covered only two crops viz. wheat and Rice. Later on, other important crops were included under the Scheme in a phased manner depending upon need for fixation of MSP for a specific commodity. At present, 25 crops are covered under MSP.

The initial CS Scheme came under criticism for the following reasons:

• Inadequacies of sub-sampling technique;
• Mounting burden on the field and supervisory staff imposed by the sampling design; and
• Inadequate scrutiny and supervision by implementing Agencies.

The Government, therefore, appointed in 1980 a Special Expert Committee under the Chairmanship of Dr. S.R.Sen to review the methodology, procedures and other related issues pertaining to estimates of cost of cultivation. Out of various recommendations made by Dr. Sen Committee, two recommendations are noteworthy. First, the Committee suggested a “Crop Complex” approach as the basis of sampling instead of a single crop. The Second recommendation relates to supervision of field work. In order to strengthen guidance and supervision, the Committee suggested one supervisor for every 5 fieldsmen. The Government introduced the modified “Comprehensive Scheme of Studying the Cost of Cultivation of Principal Crops in India” in 1981-82. Though the modified “Comprehensive Scheme for Studying the Cost of Cultivation of Principal Crops in India” represented a clear improvement over the initial scheme, controversy continued on issues pertaining to valuation of labour, computation of rent for owned land, inclusion of management cost etc. In response to this, the Government appointed another Expert Committee under the Chairmanship of Prof. C.H. Hanumantha Rao in 1990. The methodology adopted by DES at present in estimating the cost of cultivation/cost of production is based on the recommendations of Expert Committee headed by Prof. Hanumantha Rao.
Though the methodology contemplated under MSP scheme appears to be comprehensive and looks to be all right in theory but in practice none of the provisions of the scheme are complied and implemented in true spirit and working against the interests of farmers. The GOI is aware of deficiencies in the system. The methodology followed, regarding imputing family labour, rental value of land, interest on capital depreciation on fixed assets & agricultural machinery, cost of transportation, marketing charges and storage is working against the farmers’ interest.
Several Committees appointed to bring transparency in the system have suggested reforms for rectifying deficiencies and bringing transparency in the methodology under Costs of Cultivation Scheme (CCS). Inspite, the system could not produce results and offer remunerative prices to farmers. The whole gamut of obtaining Costs of Cultivation Data, its analysation, recommendations of MSPs for various agricultural commodities is monitored by Commission for Agricultural Costs and Prices (CACP). The MSPs recommended by CACP are not mandatory. The Policy Makers fix Political Support Prices (PSPs) in place of MSPs, ignoring production costs actually incurred by Farmers.

In view of the above Farmers Organizations & Farmers have been exhorting the necessity of statutory status to CACP to enable to bring transparency in the Costs of Cultivation Scheme and fix remunerative MSPs to Agricultural Commodities. In pursuance of the above Prof. Y.K. Alagh Committee was constituted by the Agricultural Ministry on May 7, 2003 to study various methodological issues in fixing MSPs of Crops and mandate to provide advice on tariff policy. Its terms of reference also included examining the existing mandate of the CACP and whether or not to reposition its role so as provide greater teeth to its recommendations. The Committee submitted its report on May 31, 2005. After a long wait of 4 years the GOI rejected crucial recommendations of Prof. Y.K. Alagh regarding granting statutory status and mandate to provide advice on tariff policy to CACP on January 15, 2009. The Farmers Organizations and Farmers expressing displeasure over unilateral decision taken by GOI regarding an important issue pertaining to farm sector without involving stakeholders.

PERCEPTION OF FARMERS ORGANIZATIONS AND FARMERS

The Farmers Organizations and Farmers are of the view that GOI appoints Committees for suggesting action plans for developing Agriculture Sector and never implement recommendations made by such Committees. The Policy Makers mind set is exhibited in not implementing recommendations of Prof. Y.K. Alagh Committee and Prof. M.S. Swaminathan Committee. The farmers’ organizations also express that as long as CACP works as an arm of Agriculture Ministry the farmers would not obtain remunerative prices to Agricultural Commodities.

Implementation of recommendations regarding conferring statutory status on CACP and mandate to provide advice on tariff policy would have paved way to address all problems relating to pricing of agricultural produce. Rejection of crucial recommendations restrained the Commission from adopting long-range marginal cost principle for analysis and development pricing and economic policies for fixing MSP. It also did not allow CACP from upward revision of the tariff rate on edible oil and additional protection for cotton beyond the WTO bound rate. This clearly shows that government wants to retain its grip on prices and tariffs of farm produce to the detriment of farmers. It appears that the Government wants to use farmers as mere tools to produce food for others and they are not paid remunerative price for their produce all these days. Hence the terms of trade have turned against farmers. The recommendations of the National Commission on Farmers (NCF) headed by Prof. M.S. Swaminathan and the Parliamentary Standing Committee on Agriculture have been brushed aside. Thus the interests of farmers are relegated to the back ground once again.

NECESSITY OF STATUTORY STATUS  TO CACP

Directorate of Economics and Statistics (DES), New Delhi obtains data regarding costs of cultivation of various crops from the centres working under Agricultural Universities of concerned States. The whole methodology adopted in collecting costs of cultivation data is not reflecting the costs actually incurred by farmers. There is no transparency, accountability and liability to the staff deployed for collecting data on costs of cultivation. The computation of costs regarding family labour & bullock power and other parameters have no relevance with the costs of cultivation actually incurred by farmers. Neither farmers nor farmer’s organizations aware that such system is in existence. Even in the cases, where CACP is convinced of higher production costs and recommend appropriate MSPs, the GOI unilaterally scales down its (CACPs) proposal and fix un-remunerative MSPs in the absence of Statutory Status to CACP.   
Several committees, since 1964, viz: Sri L.K. Jha, Dr. Ashok Mitra and Prof. Hanumantha Rao made elaborate recommendations for bringing transparency in the costs of cultivation scheme. Though the methodology contemplated in the scheme appears to be comprehensive in theory, in practice, it is working against the interests of farmers. These deficiencies were brought to the notice of Government on many occasions by Consortium of Indian Farmers Associations (CIFA). The methodology followed regarding imputing family labour, rental value of land, interest on capital, depreciation on fixed assets and agricultural machinery, cost of transportation, marketing charges, insurance premium, risk factors and storage is working against farmer’s interests. It is observed that only part of costs incurred are alone considered and profit to the farmer which constitute net income is not considered.
The MSP plays vital role in containing distress sale by farmers. Since the methodology adopted in fixing MSP is not reflecting actual costs incurred by farmers, the price fixed by GOI is working against their interest since the price is not remunerative to the farmer.   Therefore, the whole system is required to be revamped and transparent procedures introduced by involving and inducting more farmers' organizations representatives into the system and granting Statutory Status to CACP. 
Failure to provide remunerative MSP for Agricultural Commodities, resulted suicide deaths of Lakhs of farmers, acute crisis in farm sector and food security of the nation. The GOI is very much concerned with food security of the Nation. Food Security Mission is appointed with measures to be initiated and provided millions of rupees to achieve food security. Unless remunerative price is offered to farmers all efforts initiated will be futile attempt.

Thus there is immediate need to take stock of the situation, revamp whole system to reflect actual current costs. Further the work relating to collection of data being performed by DES should be transferred to CACP by granting statutory status to CACP to enable to bring transparency and accuracy in collecting data and arriving costs actually incurred by farmers. The National Commission on Farmers headed by Prof. M.S. Swaminathan also recommended for strengthening CACP by inducting more farmers’ organizations representatives including women into the system.

CONCLUSION :

The contents and issues discussed in the Article exhibit biased treatment of Policy Makers towards Agriculture Sector particularly farmers. Lack of commitment, policy fatigue, and impaired governance thrown farm sector into acute crisis. This resulted suicidal deaths of lakhs of farmers besides affecting Food Security of the Nation. The only alternative left to the farmers is to empower themselves and agitate peacefully over the injustice meted out by them. Further, this is also time for farmers and those depended on farming, who form majority of electorate, to show their strength and will through exercising their ballot power in the coming elections by voting only to the candidates who promise to work for implementing the recommendations of Standing Committee on Agriculture, Prof. Alagh Committee and Prof. Swaminathan Commission.

P.V. Subbaiah Choudary, Advisor, Consortium of Indian Farmers Associations (CIFA), Flat No.209, Vijaya Towers, Shanthi Nagar, Hyderabad – 500 028. 040-23319643 Cell No. :    9866318309