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Farmers protest: How does Swaminathan formula differ from current MSP system? Explained

By | Edited by Kunal Gaurav
Feb 14, 2024 06:14 PM IST

Farmers protest: Farmers demand legal guarantee for Minimum Support Price (MSP) based on Swaminathan Commission formula. Why? The simple explanation is here.

The key demand of farmers participating in the 'Delhi Chalo' march is to compel the union government to provide a legal guarantee for Minimum Support Price (MSP) based on the Swaminathan Commission formula. But what exactly is it? Here, we break down the nitty-gritty of ‘C2+50 per cent’ formula.

Farmers protest: Police use tear gas to disperse farmers gathered at the Punjab-Haryana Shambhu border during their 'Delhi Chalo' march, in Patiala district, Tuesday, Feb. 13, 2024. (PTI)
Farmers protest: Police use tear gas to disperse farmers gathered at the Punjab-Haryana Shambhu border during their 'Delhi Chalo' march, in Patiala district, Tuesday, Feb. 13, 2024. (PTI)

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What is MSP?

MSP is the lowest price set by the government for purchasing crops from farmers. The government declares these rates each season to guarantee fair prices for farmers, promoting increased investment and production.

ALSO READ- Congress promises legal MSP to farmers, had opposed in 2010 during UPA rule

Which crops are covered under MSP?

• Kharif crops such as Paddy, Jowar, Bajra, Ragi, Maize, Arhar, Moong, Urad, Cotton, Groundnut, Sunflower Seed, Soybean, and Sesamum.

• Rabi crops such as Wheat, Barley, Gram, Masur, Rapeseeds & Mustard, Safflower, and Toria.

• Additionally, MSP is announced for Copra, De-husked Coconut, Jute, and Fair Remunerative Prices are declared for Sugarcane.

Who sets the rates of MSP?

The Commission for Agricultural Costs & Prices (CACP), an attached office of the union agricultural ministry, suggests MSPs for specific crops.

The factors considered by CACP for fixing MSP include the cost of production, domestic and international prices, demand-supply conditions, inter-crop price parity, and terms of trade between the agricultural and non-agricultural sectors.

The final decision on MSP levels is made by the Union government's Cabinet Committee on Economic Affairs (CCEA).

ALSO READ- Rahul Gandhi attacks BJP over farmers' protest: 'Those who spread nails on road...'

How is MSP calculated?

The CACP calculates three types of production costs for every crop, both at the state and all-India average levels.

1. 'A2':

• Covers all paid-out costs directly incurred by the farmer in cash and kind on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc.

2. 'FL':

• Includes A2 plus an imputed value of unpaid family labour.

CACP considers A2+FL as the cost of production and sets MSP at 1.5 times of it.

ALSO READ- Bharat Ratna: Who is MS Swaminathan, father of India's green revolution?

What changes did the Swaminathan formula propose?

The National Commission on Farmers, chaired by agricultural scientist M S Swaminathan, in 2004, submitted a report to the government in 2006, suggesting that the solution to the farm crisis was to provide remunerative prices to the farmer.

The commission recommended that the MSP should be 1.5 times the farmers’ input costs.

For the calculation of input costs, however, the Swaminathan Commission laid down a different formula. Along with the paid-out cost (A2) and the imputed value of family labour (FL), also included the interest on the value of owned capital assets, rent paid for leased-in land, or the rental value of owned land (C2).

ALSO READ- ‘Cannot treat farmers like criminals’: Bharat Ratna awardee MS Swaminathan's daughter

Key difference

The government sets MSP at 1.5 times the Cost of Production (CoP), where Cop is A2+FL.

The Swaminathan Commission, however, suggests that CoP should be based on C2, proposing the 'C2+50 per cent' formula for setting MSP.

ALSO READ- NITI Aayog calls farmers’ panel formula impractical

Current MSP vs. Swaminathan Formula - the difference?

Here are the estimated production costs for the Rabi marketing season 2024-25 for various crops, calculated using both A2+FL and C2 formulas by the CACP, reported by Down To Earth.

CropsC2MSP announced (Rs/qtl)MSP as per C2+50%
Wheat16522,2752,478
Barley16141,8502,421
Gram45475,4406,820.5
Lentil48906,4257,335
Rapeseed & Mustard40685,6506,102
Safflower54145,8008,121
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