CACP: Government's doll, not farmers hope

S. Kannaiyan

29.10.2011

Farmers leaders from across the country met in Delhi recently and discussed various issues related to agriculture. Leaders from Punjab said that the issue of minimum support price (MSP) to agriculture produces was to be discussed as the first subject. One key issues related to Minimum support price is to calculate scientifically the cost of production and a reasonable margin for the producing farmer. I would like to share my thoughts related to the pricing of agricultural produces in India.

Rice, wheat and sugarcane are the three only crops that can get the MSP. Wheat and rice are largely procured by the state and central governments for Public distribution system (PDS). Sugar factories are bound to buy sugarcane from the farmers at the rate announced by the central government and state governments. State governments announce state advisory prices (SAP) whereas the central government announces minimum support price. As for as other crops, MSP announced by the government is there only on the records. Institutions like National Federation of farmer’s cooperatives (NAFED) buy small quantity sometimes from the market at MSP price, but it is really not helping farmers to realize the MSP.

The Commission for Agricultural Cost and Prices (CACP) is a body that decides and recommends to the central government the MSP of some major crops. The functioning of CACP is always to satisfy the treasury of the government and not the farmers. Indeed, the CACP’s functioning is non transparent and autocratic, and farmers unions have no representation, nor are they consulted in fixing the MSP. 

Farmers of Karnataka and Tamil Nadu, along with other farmers, are thus demanding scientific prices for their produces. The CACP and the governments say that they announce MSP based on scientific calculations. The calculation of scientific price is not something impossible in this country. One should really go to the field and talk to the farmers and then it would be very easy to calculate. But it is unfortunate that government expects poor farmers to subsidize food and goods for the whole country. But the announcement of MSP always miss matches the real cost of production. For instance, DAP fertilizer price was Rs.525 a year back, and Rs.880 now. The minimum wages under National rural employment guarantee Act in Tamil Nadu was 80 rupees 2 years back and it is Rs.125 now. Invariably, all the input costs have been increased many folds while the market for the farmers is always unfavorable. For example, the price of turmeric per quintal was Rs. 19 000 to Rs.20 000 last year, and Rs. 4 000 now. 

The government intervenes if there is a small change in the share market, but doesn’t care about the vast fluctuations which disfavor the farming community. Price of cotton has always been determined in favor of the textile industry. Government intervenes by allowing exports and imports in order to ensure cheap supply of cotton and yarn to the cotton industry. Similarly, pro-active market intervention by the central government on food grains and vegetables aims to provide low price for the consumers, not to ensure reasonable prices for the farmers. Moreover, none of the state agricultural universities and the central research institutions arrived at a reasonable cost of production of milk. Whenever farmer’s demands a little increase for milk price, state governments intervene to protect the interests of the consumers, so milk price is always under the government’s control. In other words, it is subsidized by the farmers. In the case of central government, it sometimes prefers to import milk powder and butter oil by waiving import tariffs. These milk products were already heavily subsidized in the production process and also enjoy export subsidies from their country of origin.

The crop failures are not compensated by appropriate National agriculture insurance for individual farmers. Lack of infrastructure facilities like rural godowns, post-harvest management facilities, some special needs of storage and credit for the produces is the factors compelling the farmers to sell off their produces at throw away prices at the time of harvest. Big corporations and supermarket chain companies buy produces at the time very low market prices and release them in the consumer market at very high price. Such companies have all the facilities of storage, processing, quality control, etc. Interestingly, 60% of the consumers are farmers themselves who are paying high prices on the market, which are not reaching their fellow farmer pockets, but to the companies and middlemen. 

Farmers’ fight for prices is not for the announcement of MSP only. India is importing edible oil and pulses and also sometimes wheat, sugar, milk powder etc.  Indian farmers are exposed to the international market and cheap imports of agricultural goods destroy domestic production and livelihood of rural people by distorting the price for the local produces. The Free Trade Agreements and India’s commitment in the World Trade Organization are the main reason for the price disadvantage for the farmers and trade advantage for the companies.

CACP is a doll of the government and not a hope for the farmers.