Arun Jaitley’s Budget speech was vague on the details, and closer inspection reveals that it was also misleading.
Arun Jaitley, presenting his fourth Budget as finance minister, announced that he is fulfilling a promise made by his party in the election manifesto for the 2014 Lok Sabha elections – the promise of a minimum support price (MSP) that is 50% higher than farmers’ cost of production. “Government has decided to keep MSP for all the unannounced crops of kharif at least at one and half times of their production cost,” said Jaitley, and went on to add that this decision will prove to be a ‘historic’ step towards doubling the income of farmers.
However, on closer inspection, it has emerged that the finance minister’s announcement is misleading. The MSP for eligible crops is declared by the Commission for Agricultural Costs and Prices (CACP). The CACP has three different definitions of productions costs – A2 (actual paid out cost), A2+FL (actual paid out cost plus imputed value of family labour) and C2 (comprehensive cost including imputed rent and interest on owned land and capital). As is evident, C2 > A2+FL > A2.
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