Central panel for revamp of MSP calculation

Recommends mechanism for price surety to farmers

The committee constituted by the Union agriculture ministry to examine the mandate of the Commission for Agricultural Costs and Prices (CACP) and various aspects of fixation of minimum support price (MSP) has submitted its report. In its recommendations, it has suggested a complete revamp of methodology to calculate MSP and introduction of mechanisms, such as Deficiency Price Payment (DPP) or Price Insurance (PI) for price surety, for all the crops for which MSP is declared.

The report was submitted last month and accessed by Business Standard suggests while calculating the cost of production, two villages be selected in place of one village at present from each select block for wider coverage to strengthen the system of collection of cost data from farmers. Also, the committee is of the view that counting of time spent by farmers in production alone and valuing it as the wage rate of ordinary labour is gross undervaluation of the farmers' time. It is felt farmers should be treated as expert in agricultural work.

The committee also suggests head of the family engaged in farming should be valued at skilled wage rates. Also, it suggests the interest on working capital should be estimated for whole, not half, of the period of a crop season and should be on actual interest paid out by the sample farmers. Further, the land rental values should be based on actual rates prevailing in the sample villages.

The committee said various items of fixed cost are not projected for the year for which MSP is announced. Therefore, it recommends interest and depreciation on fixed capital be projected by raising them at the rate of inflation in construction material. It also suggests essentially rental value of owned land and interest on fixed capital be considered for fixed cost.

Set up on April 1, 2013, the committee was chaired by Ramesh Chand, director of the National Institute for Agricultural Economics and Policy, Delhi.

The committee further suggests CACP should monitor farm harvest prices in the season for all important crops in the states to oversee that farmers are not paid price below MSP. If prices fall below statutory MSP, CACP should make an immediate recommendation to government to address the situation. As price guarantee cannot be ensured through procurement everywhere, mechanisms such as DPP and PI, be put in place.

The committee also recommends the role of CACP be expanded and it should be renamed as the 'Commission on Agricultural Costs, Prices and Policies'. CACP, based on data collected in the comprehensive scheme to begin with, should put out information on farm incomes for different crop complexes and specific categories of farmers, and make recommendations related to farm incomes and remunerative prices.

Major suggestions of the committee

• While calculating the cost of production, two villages should be selected in place of one village from each block
   
• Head of a family engaged in farming should be valued at skilled-wage rates
   
• The interest on working capital should be estimated for whole, not half, of the period of a crop season
   
• The land rental values should be based on actual rates prevailing in the sample villages
   
• Interest and depreciation on fixed capital be projected by raising them at the rate of inflation in construction material