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Swaminathan MSP (Agriculture, problems ,reforms , GS paper 3
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Farmers’ unions and political parties have been demanding the implementation of the Swaminathan minimum
support price (cost plus 50%) to address agrarian crisis and farmers’ distress. But they have not raised demands
for the implementation of the recommendations of the National Commission on Farmers, which have the potential
to provide lasting solutions.
Suicides by a large number of farmers and agricultural labourers during the last two decades or so, along with the
high incidence of indebtedness among them, is a clear indicator of emerging agrarian crisis and farmers’ distress.
According to the National Sample Survey Office (NSSO), a large number of farmers across the country are not
interested in agriculture. Lakhs of farmers have already been pushed out of agriculture as employment in
agriculture is fast shrinking. As per the preliminary results of an ongoing study by the author in Punjab, nearly 80%
farmers do not want their sons to be agriculturists.
The National Commission on Farmers (NCF) set up under the chairmanship of Sompal in February 2004, and
subsequently led by M S Swaminathan from November 2004, also bears testimony to farmers’ distress in India.
The union government’s special package of Rs 70,000 crore to address indebtedness among farmers in 2008 is
also a recognition of the agrarian crisis and farmers’ distress. Earlier, a debt-waiver package of Rs 25,000 crore
was given to compensate agricultural households whose breadwinners committed suicides in Maharashtra and
some other states.
Swaminathan’s Cost Plus 50%
As per one of the recommendations of NCF (popularly known as Swaminathan recommendations), farmers
should be given a minimum support price (MSP) of at least 50% more than the weighted average of the cost of
production (NCF 2006: 246). This recommendation, however, was not incorporated in the National Policy for
Farmers, 2007. The Ramesh Chand Committee, constituted for a comprehensive review of the Commission for
Agricultural Costs and Prices (CACP) methodology to determine MSP, made a number of recommendations—
except the Swaminathan MSP. Before the 2014 parliamentary elections, the Bharatiya Janata Party promised to
implement the Swaminathan MSP, but has since forgotten the promise. It has, in fact, submitted an affidavit in the
Supreme Court stating that the government cannot implement the Swaminathan MSP.
Farmers deserve remunerative prices for their produce. However, there is a need to have a well-informed debate
before taking any decision on the Swaminathan MSP. The following are the significant issues at hand:
(i) Will it be appropriate to fix MSP in such a mechanical manner?
(ii) What will be its effect on consumers (particularly, the poor), on inflation, and the overall growth rate of the
economy?
(iii) Will it be in consonance with the Food Security Act?
(iv) Are the political parties, across the board, sincere to implement Swaminathan MSP or are they simply doing
politics over it?
(v) Will any government be able to implement Swaminathan MSP even if it is sincere to implement it?

trends in market prices. low productivity. and buffer stocks of foodgrains.89% AHHs have land between 0. The CACP. and are victims of multipronged poverty) are another large set of people to whom the state. Given the one-third weightage of agricultural produce in the wholesale price index (WPI). which means higher costs and/or relatively lower output. thus. economic and political concerns in this regard. seven rabi crops and four other crops). shrinking employment opportunities. which are raw materials in processing and manufacturing. international price situation. both CACP and the union government are not in favour of any mechanical determination of MSP. society. The fourth and fifth questions are not only two sides of the same coin but are also very complex.14%). and government owe a responsibility. and 34. The constitution of Ramesh Chand Committee seems to be the outcome of this recommendation.8% of the total estimated rural households (156. effect on industrial cost structure. Among the AHHs. The taxpayers and the corporate sector may also not favour a high MSP. however. It is. the MSP shall have a definite effect on the cost of public procurement.4 ha. demand and supply. across parties. before recommending MSP of any of the crops. The government too is constrained. Perhaps it is in this context that the NCF recommended the revision of the terms of reference and review of the CACP methodology of MSP determination (NCF 2006: 246).14 million). Sometimes even inefficient production. Therefore. It has a number of societal. effect on cost of living. changes in input prices.(vi) And above all. These three categories of AHHs account for 69. As regards the third question. shall also have an effect on the overall growth rate and the global competitive capacity of the economy. clear that the CACP cannot recommend MSP without taking into account other factors.9% have land between 0. and declining growth rate of net per hectare returns. These include the cost of production. Ground Reality The last question is the main focus of this commentary as the farmers and their leadership seem to be convinced that the agrarian crisis and farmers’ distress are mainly because of low levels of MSP. the proportion of marginal and small farmers comes out to be 86. in addition to cost of production. effect on issue prices (mainly for public distribution).44% and are classified as marginal farmers. and that the Swaminathan MSP is the solution. intercrop price parity.1 ha and 0. the CACP takes into account a variety of factors. it is difficult to say anything about the sincerity and commitment of the political leadership. Perhaps nowhere in the world are farmers given cost plus 50% support price. 2. analyses a wide spectrum of information and data. it is significant to mention that the terms of reference of the CACP do not allow a mechanical determination of MSP as recommended by the NCF.01 hectares (ha) of land and are simply notional AHHs. too. to implement the Swaminathan MSP. Clearly 42.58% of the total. higher MSPs will certainly escalate prices and costs of living. If we add small farmers (17. is also covered by MSP. The answer to the second question is also addressed in the CACP’s terms of reference as it takes into account the likely impact of MSP on cost of living. The prices of agricultural produce. MSP has to be set within certain limits. Given the track record of the election manifestos of various political parties. parity between prices paid and prices received by the farmers. But they need to correct their understanding in view of the large proportion of marginal and smallholdings. and effect on industrial cost structure. Nonetheless. There is a direct correlation between MSP and cost of providing food security to 67% of the Indian population. According to the 70th round survey of the NSSO (2014).2% of rural households (RHHs) are without any agricultural land. distribution. will it provide a long-term solution to agrarian crisis and farmers’ distress? In the case of the first question. increasing production costs. and implication for subsidy. thus. the estimated number of agricultural households (AHHs) in India is 90. While recommending the MSP for various agricultural commodities (about 25 crops at present. general price level. 14 kharif crops. remain the significant determinant of MSP but other factors. who constitute 57. Another 31. input– output price parity.65% have only 0. Households below poverty line (BPL) (who are income as well as asset-and skill-poor. I wish they were right. Costs. are not ignored. .2 million.41 ha and 1 ha. effect on general price level.

5 acre). irrigation. and public investment in agriculture. insurance. The question is: how will the Swaminathan MSP make these farmers economically viable and provide sustainability in the long run? For the submarginal farmers (with land up to 0.41 ha (one acre) and that of smallholdings is 1. food security.28% of their monthly income (NSSO 2014). much lower than the upper size-class limit of 2 ha. Even in the case of small farmers. NCF’s Other Recommendations Significantly. Their share of income from agriculture is just 16. and lack of employability of surplus workforce in agriculture. Within agriculture. The relative economic conditions of the agricultural workforce (cultivators as well as labourers) have gone poorer vis-à-vis their counterparts in the non-agricultural sectors.4 ha. income from agriculture is 40. The NCF also submitted a Revised Draft National Policy for Farmers in October 2006. the share of agriculture in gross domestic product (GDP) dwindled to 13%. income from cultivation accounts for 57. bio-resources. nor adequate income to meet basic needs. shortage of water for irrigation. Clearly. These reports revealed that the main causes of agrarian distress. the major share of the monthly income of these AHHs comes from nonagricultural sources. who account for 87% of AHHs. At the national level. farmers and political parties are demanding the implementation of Swaminathan MSP and are not demanding the implementation of the other recommendations of the NCF. and thereby increase the per capita income of the agricultural workforce. and absorbing surplus workforce in agriculture therein shall be the most potent and lasting solution to the agrarian crisis and .65% of their monthly income. Moreover.01 ha and 0. credit. to improve agriculture and the economic condition of farmers.01 ha) agricultural income accounts for merely 0. Given their economically unviable holding size. two-thirds of agricultural land is not under assured irrigation. human development. These reports made several recommendations. However. Nearly 35% of the farmers with land between 0.41 ha to 1 ha (1 acre to 2.” The first report was submitted in December 2004. and lack of opportunities for assured and remunerative marketing. On the eve of independence the share of agriculture in India’s GDP was 55% and its employment share was about 75%. and generations of employment therein is another significant recommendation of the NCF. the generation of employment in the rural non-farm sector. let alone costs of health and education. It is also important to understand that Swaminathan MSP shall increase farmers’ incomes only by the difference between the prevailing MSP and the Swaminathan MSP. Ironically. low levels of education and skill.55% (NSSO 2014). and small quantities of marketable surplus. Those recommendations are mainly in the domain of land reforms.4 ha have wage employment as their principal source of income. inter alia. the NCF submitted five reports to the Government of India during 2004–06 under the main title “Serving Farmers and Saving Farming. and the rural non-farm sector. especially in the case of marginal and small AHHs. mainly based on agricultural produce. while its share in employment is still around 55%. In view of the ever shrinking employment opportunities in agriculture. As of today. such smallholdings of land do not provide year-round employment. including cost plus 50% MSP. the main challenge is to raise the productivity of land and labour. were unfinished agenda of land reforms. The NCF has thus looked for solutions to agrarian crisis and farmers’ distress both in agriculture as well as beyond agriculture. MSP alone is not going to address the agrarian crisis and farmers’ distress.89% of their total monthly household income. technology fatigue. productivity.The average size of the marginal holdings is only 0. In the holding size-class of 0. and the last in October 2006. including suicides by farmers. there will be a marginal increase in the total net income of these farmers from agriculture even if they are given the Swaminathan MSP. Taking into account the large number of underemployed and those disguised unemployed workers in agriculture. Beyond Farms and MSP The development of the rural non-farm sector. these other recommendations are of a more fundamental nature and have the potential to provide a long-term solution to the agrarian crisis and farmers’ distress. inadequate access to and availability of institutional credit.

health. This would require providing them quality education and skill. The answer to this lies in the development of the rural non-farm sector. even farmers are not ready to understand these hard facts. but not the marginal-and small-holding farmers. and many a times by the procurement agencies. and infrastructure and not in freebies and subsidies. It is high time that. and to generate gainful employment for surplus labour. skill. Unfortunately. In the present era of market-driven development. It is the only “mantra” to decrease pressure of workforce and population on agriculture.farmers’ distress. the CACP and public procurement system are liable to be more vulnerable. The periodical occurrence of crop loss/failure is also not covered by the CACP. Incidentally. .and large-holding farmers and that too in the short run. there was a move to freeze MSP. inter alia. The employability of this surplus labour is the necessary condition for their employment outside agriculture. as an economy grows the share of agriculture in GDP and employment goes down and India is no exception. It is in this context that the farmers must understand that even the very existence of CACP and the public procurement system (see the Shanta Kumar Report released in 2015) may not be there for all time to come. The fundamental issue is: how to shift the surplus workforce from agricultural to non-agricultural sectors. The Swaminathan MSP may help medium. along with demanding remunerative MSP. thus lies in improving rural education. this has been experienced by most present-day developed countries. The long-term dynamics of growth and historical experience of other countries clearly indicate that. In 2002 also. farmers (mainly because of a lack of awareness) and political leadership (that tends to mislead) are demanding only the Swaminathan MSP and are not raising any serious demands for the implementation of other fundamental recommendations of the NCF. they must demand the implementation of more fundamental recommendations made by the NCF. The lasting solution. The access to and affordability of quality education and health is sine qua non to achieve this goal. Historically.