The government has announced a fairly respectable increase in minimum support price (the price at which the government buys kharif crops from farmers). This is to be welcomed. But more may be needed.

To begin with, the cost taken into account is the value of inputs and the imputed value of family labour. A committee, I had chaired, had recommended the inclusion of some items in it like the time spent by the farmer on going to the market. That, I think, is now included but big items like imputed rent and capital costs computed as interest are not included.

This has led to MS Swaminathan correctly said that 50 percent of additionality has not been provided. He, of course, had noted in his report that I had pointed out in those days that the terms of trade had fallen for agriculture and its profitability had fallen by 14 percent in a decade.

Terms of Trade Moving Against Agriculture

This trend was reversed, but since 2014, according to the Commission for Agricultural Costs and Prices (CACP) reports, the terms of trade are again moving against agriculture. While the rest of us have improved our income by around 5 percent every year, the farmer is worse off and coming out on the road.

Niti Aayog officials have correctly pointed out that MSP is 50 percent higher than paid-out costs in most crops but that was not the National Commission on Farmers' recommendation. Hence, the raft of protests.

MSP Covers Few States

In any case, the MSPs effectively matter for and cover only a few crops and that too in a few regions. Punjab, Haryana and Western UP account for most of the purchases of paddy. In other states, the quality of rice is an important issue, like the Jirasar, the basmati or the Kerala Red Rose and there is no procurement there.

In pulses and oilseeds, there exists only token procurement because the prices the farmer has sown for are much higher. The farmer knows that after harvest he will not get the then prevailing price of over Rs 200 a quintal and will settle for Rs 150. The MSP of Rs 50 or 60 is not important and he is worried about highly subsidised imports from the US, Canada or Australia.

The government hardly ever imposes a high enough tariff because of the needs of the consumer and the fight goes on.

National Agricultural Cooperative Marketing Federation (NAFED) of India does some procurement but it is usually short of funds. Therefore, in reality, the MSP and 150 percent are pegged to base slogans on. The real issue of markets, first stage processing and supply chains lie elsewhere.

Getting Walmart to buy farmers produce and in fact give them space in its warehouses is far more important but simultaneously we are told that its case is slowed down because of the influential trader lobby. Not that it will be added quickly as a supply chain and regulated as it must be.

In pulses, vegetables, fruits, milk and milk products, where demand is rising fast and where we get food and agriculture inflation, the infrastructure has yet to be built. But don’t scoff at the MSP rise. It is a good thing after all the rona dhona in this piece.

Yoginder K Alagh, a former Union minister, is an economist.