Farmers' protest: MSP guarantee to cost additional Rs 10 lakh cr, almost equal to infra spending

Almost 200 farmer associations, mostly from Punjab and Haryana, are marching to Delhi, seeking a law to guarantee the minimum support price (MSP) for their produce. Some farmer groups are even demanding legislation for universal MSP, that is, every crop cultivated by the farmer should be open to procurement at the minimum support price by the government in the Centre.
 
Sources told Business Today that demand is not feasible as it will cost the Centre a whopping Rs 10 lakh crore. They said the total value of agricultural produce in FY 20 was Rs 40 lakh crore. This included produce from dairy, farming, horticulture, livestock, and MSP crops. 

In FY 20, the total agricultural produce's market value was Rs 10 lakh crore. These included 24 crops that were included in the MSP purview.
 
For the last two to three years, sources continued, people had been made to believe, rather falsely, that MSP was integral to India's agricultural operations. "However, that is far from the truth. For FY20, the total MSP procurement stood at Rs 2.5 lakh crore, that is 6.25 per cent of the total agricultural produce, and 25-odd per cent of the produce under MSP," they said.
 
"Now, if an MSP guarantee law were to be introduced, the government would be looking at an additional expenditure of at least Rs 10 Lakh Crore, annually, that is each year," sources said, adding that this is almost equivalent to the expenditure (Rs 11.11 lakh crore) this government has set aside for infrastructure in the recent interim budget.
 
Rs 10 lakh crore is also more than the annual average expenditure the government has had in infrastructure in the last seven fiscal years (Rs 67 lakh crore, between 2016 and 2023). They said a universal MSP demand did not make any economic or fiscal sense, and was a "politically motivated argument against the government which has had an extensive welfare record for the last ten years".

They also suggested that this additional money, if guaranteed is made, will have to be either cut in spending in infrastructure and defense or more taxation through direct and indirect taxes. 

Sources said that the problem was not agricultural, or economic. "It is purely political, attempted before the Lok Sabha elections of 2024, and backed by political parties under the radar for extensive corruption," they said. 

"The mere idea of spending Rs 10 lakh crore, annually, from a budget expenditure of Rs 45 lakh crore (FY25), is equivalent to a fiscal disaster that will clearly derail our fastest growing economy," they said.

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