MSP scheme better than farm loan waiver: SBI research report

An SBI report on Monday said estimates of Rs 80,000 crore for implementation the proposed MSP scheme are exaggerated and emphasised that income compensation is better than waiving loans of farmers.

Finance Minister Arun Jaitley, while replying to Budget Speech in the Rajya Sabha last week, had said the government will take into account the actual input cost plus unpaid value of family labour while fixing the support price of crops at 50higher than the cost of production.

In the report headlined, 'Fears Regarding the MSP Scheme Are Exaggerated', the SBI Ecowrap report said there is a market perception that implementation of market compensation scheme may cost the government as much as Rs 80,000 crore, "but our estimates suggest it may be less than one fourth of this figure".

On conservative basis, the report said, the estimate shows the combined cost for wheat, paddy, bajra and maize will be less than Rs 11,500 crore.

The proposed scheme, it said, should be "judiciously monitored", adding the talks of market manipulation "as is being emphasised is not backed by data".

It further said there would be no harm if the government closely monitors the registration of the farmers under the scheme.

"It is important to at least move ahead with an income compensation scheme rather than perpetually promote a loan waiver culture for the farmers," said the SBI's research report.

The government fixes MSP of 23 commodities although it procures only wheat and paddy to supply subsidised foodgrain through ration shops under the Food Law.

At present, the government decides the MSP based on the recommendation of an expert body the Commission for Agricultural Costs and Prices (CACP).