Questions arise about the rationale and implications of adopting Dr Swaminathan’s proposed methodology for MSP calculation Co-terminus with the legal guarantee for Minimum Support Price (MSP) for all crops, another demand raised by the farmers relates to how the MSP is fixed. They want it to be calculated based on the recommendations of the National Commission on Farmers (NCF) under Dr MS Swaminathan (2006). All along, the Commission for Agricultural Costs and Prices (CACP) – a statutory body under the Ministry of Agriculture & Farmers Welfare – has been setting MSP at the level of the so-called comprehensive cost or C2 cost. C2 is arrived at by adding three components viz. A2 covers all paid-out expenses, both in cash and...
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Farmers’ demands are impractical and unrealistic
The farmers want the Govt to withdraw from the WTO and all Free Trade Agreements, which is next to impossible in a globally interdependent world After three years of hibernation, farmers mostly from Punjab are back on the roads with over a dozen demands from the Union Government. If taken on board, these are sure to spell disaster. The foremost demand is securing legal guarantees for the Minimum Support Price (MSP) of their agricultural produce. MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”. Put into practice in the 1960s under an ‘executive order’, it was meant to assure farmers that they get at least MSP from selling...
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Synchronise fund release with need
Efficient fund utilisation is crucial, and the government must judiciously identify the beneficiaries, ensuring the removal of fictitious claimants The Union government implements numerous welfare programmes to achieve various socioeconomic goals and national priorities. This is primarily done through central schemes (CS) fully funded and executed by the government and through centrally sponsored schemes (CSS) funded both by the Centre and states in varying proportions, such as 90:10, 60:40, and so on. These schemes are implemented by the states. The total expenditure of the Centre in FY 2022–23 on these schemes was Rs 1,620,000 crore (Rs 1,208,000 crore on 740 CSs; Rs 412,000 crore on 50 CSSs), constituting 41% of the total budget spending of Rs 3,940,000 crore. Efficient fund...
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Balancing welfare and fiscal responsibility
The Centre should go for a complete overhaul of its food subsidy programme. It should exclude from the beneficiaries’ list those who are better off Seen in the backdrop of 250 million persons coming out of poverty during the last nine-and-a-half years of incumbent government (as per a recent report released by Niti Aayog), Prime Minister Narendra Modi has faced flak from the opposition parties for his decision to continue with supply of free ration under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme for five years (it was announced by Modi during a poll rally in Chhattisgarh late last year). They question the logic of supplying free food even to those who have crossed the poverty line. Modi...
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Delink disinvestment from the Budget
There is a need for a paradigm shift in the approach to disinvestment; the Government must detach it from budgetary constraints and tackle legacy issues In a briefing following the presentation of the interim Budget for the financial year (FY) 2024-25 by the Finance Minister, Nirmala Sitharaman on February 1, 2024, Finance Secretary TV Somanathan stated that the “government no longer views disinvestment – fancy nomenclature for sale of Union government shareholding in central public sector undertakings (CPSUs) – from the perspective of balancing the budget”. The statement is out of sync with Sitharaman setting a target of Rs 50,000 crore as proceeds from disinvestment for the FY 2024-25 though it wasn’t mentioned in her speech. If, the government’s intent...
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The conundrum of fertiliser pricing
The fact is that non-urea fertilisers, in practice, have consistently remained under regulatory control In an office memorandum dated January 17, 2024, the Department of Fertilisers (DoF) has issued detailed guidelines for the evaluation of “reasonableness” of the MRPs (maximum retail price) for all non-urea fertilizers covered under the Nutrient Based Scheme (NBS). To be effective from April 1, 2023, the guidelines prescribe maximum profit margins that will be allowed for fertilizer companies – 8 per cent for importers, 10 per cent for manufacturers and 12 per cent for integrated manufacturers (those producing finished fertilizers as well as intermediates such as phosphoric acid and ammonia). The admissible profit margins will be calculated as a percentage of their “total cost of...
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Tread the WTO quagmire with caution
The battle for a permanent solution to Public Stock-Holding programme is a difficult one; India must fight it deftly In a meeting of the Committee on Agriculture (CoA) of the World Trade Organization (WTO) – held on October 2, 2023, in Geneva, the European Union (EU) agreed to consider India’s demand for a permanent solution to public stock-holding (PSH) program for food security. This is a significant change of stance since March 2023, when the EU along with the USA and Canada had challenged it. The issue will be taken up for deliberation in the 13th ministerial conference (MC) of the WTO (World Trade Organization), scheduled from February 26-29, 2024 in Abu Dhabi. The MC is the highest decision-making body...
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Is the Government debt sustainable?
The Government should take recourse to borrowings only for the creation of long-term assets. This will help generate income streams that can help in servicing the loans Recently, the International Monetary Fund (IMF) has forecast that India’s general government debt – it comprises the debts of the Centre and states – will overshoot 100 per cent of the GDP (gross domestic product) by the financial year (FY) 2027-28. Responding to this, the Ministry of Finance (MoF) clarified that this wasn’t under a ‘baseline scenario’ – a jargon to describe normal economic conditions. It added the IMF was referring to a ‘worst-case scenario’ wherein a global shock would equally affect all countries. Is the government’s debt sustainable? The government’s debt is...
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Differentiating welfare schemes from freebies
As election pledges of freebies escalate, Modi Government issues a warning to States at the third National Conference of Chief Secretaries In the third National Conference of Chief Secretaries held in Delhi on 28th and 29th December 2023 under the chairmanship of Prime Minister Shri Narendra Modi, the central government cautioned the states against giving freebies, and goaded them to increase capital expenditure by rationalizing welfare schemes with emphasis on eliminating inefficient subsidies. The Centre’s concern over freebies – an acronym for “something given free of charge” – has heightened because of a volley of these promised by almost all political parties in five state elections held in November 2023. It apprehends that the freebies would drain state coffers, lead...
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Establishing a robust and resilient tax system
The Modi Government has successfully addressed all key aspects to ensure the strength and resilience of the tax system The robustness of the tax regime in a country can be tested by looking at its ability to engineer and sustain an accelerated growth in its GDP (gross domestic product); help the government in garnering tax revenue commensurate to growth in GDP and be ‘progressive’ in as much as it collects more taxes from those who can afford to pay more while imposing less burden on those who can’t. Look at the growth in real GDP which is GDP at constant prices. After a decline of 5.8 percent during 2020-21 caused by Corona – pandemic, growth in real GDP rebounded to...
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