Farmers’ protests and demands for the legalisation of the Minimum Support Price (MSP) have transformed everyone into an ‘expert’ on the issue. Sumant Banerji, the National Editor of LiveMint, came up with a bizarre justification to argue in favour of MSP legalisation. On February 22nd, Banerji took to X to compare the Minimum Support Price to the Maximum Retail Price (MRP) of products sold in general stores.
“Imagine having a job where your entire salary is variable pay & nothing is fixed. So from one month to the next, it varies even as your expenses–rent/EMI, ration, tuition fees, fuel, electricity/gas bill–stays the same. How would you manage? That’s #Farmers without #MSP,” Banerji wrote as if the expenses of others miraculously go down every month.
In continuation, he wrote, “Now for all the lovely people equating farmers with every entrepreneur on the street–these entrepreneurs will die if the price of the stuff they sell varies as wildly as crops A doctor chooses to see a patient because he knows the fees he is going to get Same for a lawyer/CA.”
As if this absurdity was enough, Sumant Banerji argued that a Kirana shop owner stays in the business only because he is ‘guaranteed’ an MRP on the all goods he sells in the shop. “A Kirana store owner is in business only coz he is guaranteed an MRP on every item he sells in the shop. Same for a car dealer or a hardware store owner. A cab/rickshaw driver knows the base minimum fare for any journey & won’t go if the customer doesn’t agree to pay beforehand,” Banerji added.
The ’award-winning’ journalist, however, conveniently ignored the difference between the MSP and MRP. Firstly, it is important to understand what MSP is and how it is computed. The Minimum Support Price is the guaranteed price at which central and state governments, as well as their agencies, purchase food grains from farmers.
The Central Government sets the minimum support price using a formula that takes into account production costs and sets the price at one-and-a-half times these expenses. This method considers both explicit costs (A2), which include expenses for items such as seeds, fertiliser, pesticides, fuel, irrigation, hired labour, and leased-in land and the estimated value of unpaid labour performed by family members (Family Labour or simply FL). Notably, the government decides MSP for 22 mandated crops based on recommendations from the Commission for Agricultural Costs and Prices (CACP), state governments, and relevant Central Ministries /Departments.
Now, coming to Maximum Retail Price, The Maximum Retail Price (MRP) is a type of price regulation used to regulate the price at which consumer goods are permitted to be sold. The MRP is the maximum price that can be charged for a specific product, and it is usually stated on the product packaging or label.
Unlike MSP, the MRP is not decided by the government. It is decided by the manufacturers to safeguard consumers from overpaying for products by ensuring that it is not sold at a higher price than the MRP. While the government is bound to procure the mandate crops at MSP, in the case of MRP, the retailers often sell items at prices lower than the MRP by undercutting their margin and offering discount.
Also, the Kirana shop owner would get an MRP on a product only if it is sold. On the other hand, the farmers are demanding MSP as a legal right meaning that the government will be bound to purchase the crops farmers want to sell regardless of its demand. The customers have no legal obligation to buy the products from a Kirana store.
Comparing these two ‘Maximum’ and ‘Minimum’ scenarios ideally does not make sense, but when has it mattered to the likes of Banerji to make sense? Banerji’s argument suggests that he wants MSP to become like MRP, then which also means inflated costs, thus requiring one to completely forget the economic growth. Amusingly, the Ramnath Goenka Award-winning journalist thinks that the central government ‘commits’ to buying every good in a shop with public money.
LiveMint’s Sumant Banerji also brought doctors and lawyers to emphasise to his bizarre argument. “Now you tell a doctor to operate first & then offer him 50% of his fees, or a lawyer to fight a case & ask him to settle for 30% less or give the cab driver Rs 50 less than the price he bargained for before the start of the trip…& see how they react,” he wrote.
While doctors may have minimum fees for attending patients and as said in this case, operating the patient, they are not guaranteed patients. Similarly, nobody guarantees a certain number of clients to a lawyer, or passengers to a cab driver. Doctors, lawyers and people in other professions bear the risk of not getting any clients. Moreover, contrary to what Banerji is claiming, clients can and do ask for discounts, and many times they get such discounts. Many lawyers charge less from poor people, even take such cases without any charge sometimes, and their fee is never fixed.
Unlike doctors and lawyers, in addition to MSPs on mandated crops, farmers also get various subsidies such as seed subsidies, fertiliser subsidies, irrigation subsidies, electricity subsidies, agricultural equipment subsidies, and agricultural infrastructure subsidies, among others. Furthermore, if farmers receive a higher price than the MSP, they also have the option to sell their produce in the open market.
Even consumers’ perspective, they have the option of not availing of the services of doctors, or lawyers or purchasing goods from a particular Kirana shop owner if they find it expensive. They can either negotiate/bargain or go for some other available options. However, if MSP is legalised as demanded by farmer protestors, the government will have no option but to procure the crops at MSP even if it is not in demand in the consumer market.
One of the most essential points why it is absurd to compare doctors, lawyers, and even shop owners to farmers is that, unlike farmers, they are forced to pay income taxes. Interestingly, agricultural revenue is exempt from taxes. The Central Government cannot levy or charge a tax on agricultural income because Section 10(1) of the Income Tax Act exempts agricultural revenue from the computation of total income for any person.
It is also interesting to note that Sumant Banerji did not mention professions which do not essentially offer a salaried job such as vegetable vendors, fast food ‘Thelas’, rickshaw-pullers or cobblers. Even if they work under uncertain circumstances with no fixed income or MSP or even MRP for argument’s sake, yet they are not subjected to any special treatment or subsidies from either the Central or State governments.
Anyone advocating for MSP law must understand that enacting MSP legislation would impose a massive fiscal burden on the government, there would be a risk of undervaluation of crops with low yields, an increase in food inflation, market distortionary and economically unsustainable practices, and India would face WTO opposition as well as trade disputes with importing countries.
Notably, the MSP has increased substantially since the Modi government took power in 2014. Earlier this month, Union Minister Arjun Munda informed the Lok Sabha that the procurement of foodgrains has increased from 761.40 lakh metric tonnes in 2014-15 to 1062.69 lakh metric tonnes in 2022-23, benefitting more than 1.6 crore farmers. The expenditure incurred (at MSP values) on procurement of foodgrains increased from 1.06 lakh crores to 2.28 lakh crores, during the same period.
