Guaranteed MSP (Minimum Support Price subsidy to farmers) will claim half the Budget (The Hindu)

Procurement of 23 crops at set prices will amount to ₹17-lakh crore or Rs. 17 trillion (appx. US$ 240 billion).

In addition, if the Centre makes a law to guarantee 100 per cent procurement in all the 23 crops where MSP is announced, farmers cultivating fruits and vegetables, spices, and other crops will also demand the same.

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Full article (R. Nirmal : Dec. 17, 2020):

Thousands of farmers have been protesting at Singhu border for three weeks now and the deadlock continues. The protesters have rejected the offer of amendments to farm laws and are firm on their demand for repeal of the three laws and, most importantly, MSP guarantee and writing it into law. Cost of procuring all 23 crops for which MSP is announced will be about ₹17 lakh crore, which is 50 per cent of India’s annual expenditure as per Union Budget documents.

India has about 14 crore farmers (as per PM-KISAN enumeration); it is not right to allocate 50 per cent of the country’s budget for a small section of the population.SUBSCRIBER EXCLUSIVE

The cost of MSP and subsidised food supplies are being met by heavy borrowings from the National Small Savings Fund (NSSF) — which is an unsustainable burden on the country’s salaried class. The one solution to reduce the subsidy burden is — taxing agriculture income. Will the rich farmers of Punjab and Haryana who earn twice as much as an average Indian farmer, come forward?

In 2019-20, 11 per cent of the country’s total budget was spent on farmer welfare schemes, up from 8 per cent in 2017-18, and an even share during the UPA regime. Subsidies on food and fertiliser and expenses on irrigation schemes amounted to about ₹3.6 lakh crore in 2019-20 — a 65 per cent jump from 2017-18.

This follows introduction of the PM-KISAN scheme and a leap in food subsidy from ₹1 lakh crore to ₹1.5 lakh crore. Procurement of food crops including paddy, wheat, pulses and oilseeds under MSP has seen a dramatic increase: Against 1,768 lakh tonnes of paddy procured between 2009 and 2014, 3,069 lakh tonnes of paddy were procured between 2015 and 2020. Compared to 1,395 lakh tonnes of wheat procured between 2009 and 2014, 1,627 lakh tonne of wheat have been procured in the last five years.

In principle, MSP is not an economically efficient way of helping farmers. Its poor implementation, further, has created problems of equity with large farmers of just two States — Punjab and Haryana — flourishing, even as marginal holders in eastern States such as West Bengal continue to remain out of the support net.

West Bengal, despite being among the top three paddy producers in the country, gets minimal MSP support — 4.6 per cent of the total procurement in paddy is from West Bengal as against 28.4 per cent from Punjab. While more than 95 per cent paddy farmers in Punjab and about 70 per cent farmers in Haryana are covered under MSP operations, in other major rice-producing States such as Uttar Pradesh (3.6 per cent), West Bengal (7.3 per cent), Odisha (20.6 per cent) and Bihar (1.7 per cent), only a minuscule number of farmers benefit from procurement, as per a CACP report.

If the Centre makes a law to guarantee 100 per cent procurement in all the 23 crops where MSP is announced, farmers cultivating fruits and vegetables, spices, and other crops will also demand the same. In 2016-17 alone, ₹70,000 crore was borrowed from NSSF by the FCI. This increased to ₹1.21 lakh crore in 2017-18 and ₹1.91 lakh crore in 2018-19.

Taxing agriculture income

Agriculture income including that from sale of farmland is exempt under Section 10 (1) of the Income Tax Act, 1961 without any limit. So, rich farmers and politically influential people use the provision to convert black money into white.

There is no reason why the agriculture income of rich farmers who earn more than the salaried employees be exempt from tax. It in fact includes many corporates who run seed companies and whose profits run into crores.

In 2019, a Comptroller and Auditor General report red-flagged the irregularities in exemptions given by the taxman on agriculture income. It said that claims of tax exemption on farm income were given based on “inadequate verification or incomplete documentation” in more than a fifth of the 6,778 cases it looked into. It added that among the farm income exemption claims it looked into, exemption was granted in hundreds of cases where land records or proof of farm income was not available.

According to an article published in the Economic and Political Weekly by Govind Bhattacharjee, a retired Director General from CAG (who guided the audit operations in 2019 mentioned above), in 2013-14, nearly four lakh people declaring farm income were granted exemption from paying tax — their total agricultural income exempted from tax was ₹9,338 crore in that year. Assessees who had reported agricultural of more than ₹5 lakh each between 2014-15 and 2016-17 were 22,195.

Small and marginal farmers whose only source of income is agriculture can be exempt from taxes, but the blanket exemption on agriculture income should be stopped. This means, the exemption would continue for roughly 86 per cent of the peasants of the country. The 14 per cent rich farmers should come forward to help the rest get MSP support.

https://www.thehindubusinessline.com/opinion/guaranteed-msp-will-claim-half-the-budget/article33357330

The demand by farmers for agricultural subsidies from Govt. to grow crops and market them afterwards -- including asking Govt. for enormous sale subsidy (MSP) totaling trillions of rupees (billions of dollars) annually -- clearly indicates the urgent need to reform and modernize farming policies and practices (e.g. having more innovation and diversification in choosing / growing crops, etc.) and enhance privatization (private sector participation by businesses and corporations etc.) in agricultural sector, which will lead to farming / agriculture in India becoming self-reliant and revenue-neutral (without requiring the Govt. to subsidize and support farmers with public funds to pay for MSP etc.).

The Govt. should not be in the business of purchasing, storing and selling grain / crop produced by farmers on their lands, which is solely the job and responsibility of farmer (crop producer), whether by himself or through others including private businesses and corporations, but not Govt.

Anyway, the Govt. can achieve the reforming and modernizing of farming / agricultural sector very easily and quickly, by just stopping the MSP payments to farmers altogether.

Note, if a farmer (rich or poor, big or small) can't sell his / her produce (crop) without Govt. subsidy (MSP) then he / she needs to either get out of farming or grow another type of crop which can be marketed / sold without Govt. help / subsidy (MSP).