'It would be financial suicide': Capitalmind CEO says govt should not pass law for MSP, it will mean instant bankruptcy

As farmers pressed for a law to guarantee the minimum support price for their crops, Capitalmind founder and CEO Deepak Shenoy on Tuesday said the government should not make any law for the MSP as it would lead to "instant bankruptcy of the nation". He said currently, only a small portion of all rice and wheat is bought, and that too from a few states. "Make it guaranteed and there is simply not enough money available. This would be financial suicide for the whole country." 

He said rich farmers - with any level of income, even 100s of crores - don't pay income tax. "(Even corporations in the agri business don't have to) This is unfair," he said.  

Shenoy said the government has an income guarantee scheme (NREGA) "which should be all that is needed". "I don't think it (NREGA) helps but it should be for just bare sustenance. This applies to all Indians, not just farmers. We shouldn't guarantee anyone unlimited income - take the risk which means deal with some downside, and then do take the upside," he said. 

Ashok Patel, a chemical engineer and independent climate researcher, seemed not that convinced with Shenoy's argument and asked: "Isn't MSP similar to minimum wages? If you work you get minimum wages and similarly, if you produce agricultural produce you get MSP for it. Also, farmers should be allowed to sell their produce directly to anybody."

To this, the Capitalmind CEO responded negatively and said: "You get min wage only if you are employed. No one is forced to employ you."

Almost 200 farmer associations, mostly from Punjab and Haryana, have been demanding a law to guarantee the minimum support price 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.
 
Earlier today, sources told Business Today that demand is not feasible as it will cost the Centre a whopping Rs 10 lakh crore - more than the fund allocated for infrastructure in the Interim Budget. They said that for FY20, the total MSP procurement stood at Rs 2.5 lakh crore, which is 6.25 per cent of the total agricultural produce, and 25-odd per cent of the produce under MSP.
 
"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). The sources said that 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".

Also read: 'Dilli Chalo' protest: Farmers call ceasefire for now, say will try again tomorrow