Dear Shri Shivrajsinghji :
{ minister.rd@gov.in / contact@shivrajsinghchouhan.net
}
For past few years , various Farmer Unions have been demanding legally
binding guarantees of MSPs for various farm produce - even though, the Government has been
purchasing these crops at MSPs , through tradition
Over the past 3 / 4 years , agitations by farmers have resulted in :
Ø Blockages of highways leading to total stoppage of
traffic
Ø Loss of life and limbs
Ø Huge production and revenue losses, for farmers /
Govts / Public
I understand, this matter is scheduled for a hearing in Supreme Court
today – and a bilateral meeting between the Farmer Unions and the Govt., on 8th
April
It is high time , both the parties , in a spirit of “ Give and Take “ , reach
a compromise formula soon and move on to a peace-inspired progress towards “
doubling of farm income “ in next 3 years
GIVE ( for the Govt ) :
Ø Legally binding MSPs for pre-determined crops , using
a transparent formula . The structure ( components ) and the logic (
determinants ) of this formula will be pre-agreed by the parties. Thereafter,
the formula will use various INPUTS and “ announce “ the MSPs for various crops
for each season ( full calculations will be made public , and automatically
) . Once published , this will be binding on the Govt and the farmers. Both the
parties to set up a joint “ Commission “ , which will , periodically revise the
formula
TAKE ( for the Govt ) :
Ø The working of the formula will ensure that the TOTAL
PAYOUT by the Govt. in any given FINANCIAL YEAR , for purchase of various crops,
at the ANNOUNCED MSPs ( for each crop , for each season ) , SHALL NOT EXCEED
, a pre-determined % age of Government’s estimated ANNUAL REVENUE BUDGET for that year.
Ø In this way, Government will know in advance , the
provision to be made for each year , in its revenue budget. This will ensure
that the actual govt expenses on this account do NOT exceed the budget
figures.
Ø This fine-tuning will be achieved by the FORMULA , by automatically tweaking
the MSP ( Minimum Support Price ) and the MPQ ( Maximum Purchase
Quantity ) of each crop so that the SUM TOTAL
does not exceed the budget figures.
Ø This will mean , that neither an MSP , nor the QUANTITY
( that farmers offer for purchase by the Govt., ) of any given crop, are FROZEN
.
Both
become VARIABLES In the formula
Now , using this “ Understanding “ as the foundation for a COMPROMISE (
a Win-Win
situation for both the parties ) , I submit for your consideration, the
following calculations and request you to offer the same ( of course, with modifications
suggested by farmers / farm experts / statisticians / Digital Crop Survey /
Consumers / Processors etc ) to the Farmers Unions, in your forthcoming meet on
8th April
With regards,
Hemen Parekh
www.HemenParekh.ai / www.My-Teacher.in / www.HemenParekh.in / 02 April 2025
Updated Automatic MSP Formula with Minimum Procurement Guarantee
Core Idea :
The formula
now ensures a minimum procurement guarantee (e.g., 25% of total production per
crop) while still capping
the total MSP payout at 10% of the government’s revenue budget.
It uses
Digital Crop Survey (DCS) data and a software system to dynamically adjust procurement
quantities, balancing farmer security and fiscal limits. Surplus
management is addressed separately afterward.
Key Factors in the Formula :
1.
Total Revenue Budget (TRB)
o
Definition: The government’s total revenue expenditure for the fiscal year.
o
Data: ₹35,02,136 crore for 2023-24.
o
Role: Sets the fiscal ceiling. At 10%, the Maximum
MSP Payout Cap (MPC)
= ₹3,50,213.6 crore.
o
Why: Ensures the government’s financial commitment is predictable and
sustainable.
2.
Maximum MSP Payout Cap (MPC)
o
Definition: The total budget for MSP procurement, capped at 10% of TRB.
o
Calculation: MPC = TRB × 0.10 = ₹3,50,213.6 crore.
o
Role: Limits total expenditure, addressing the government’s concern about
runaway costs.
3.
Digital Crop Survey (DCS) Data
o
Definition: Real-time production estimates for
each MSP-covered crop.
o
Data: 332.3 million tonnes of food-grains in 2023-24 (specific crop
breakdowns assumed for calculation).
o
Role: Provides accurate production data (TP_c) to calculate
procurement quantities.
o
Why: Enables precision and transparency, reducing disputes.
4.
Baseline MSP per Crop (MSP_b)
o
Definition: The announced MSP for each crop.
o
Data: Paddy = ₹23,000/tonne, Wheat = ₹24,250/tonne, etc.
o
Role: Guarantees farmers a minimum price, legally enforceable as demanded.
o
Why: Ensures income stability, a core farmer demand.
5.
Total Production per Crop (TP_c)
o
Definition: Estimated production per crop from DCS.
o
Example: Rice = 1200 lakh tonnes, Wheat = 1100 lakh tonnes (hypothetical
split).
o
Role: Basis for calculating procurement quantities and potential payouts.
o
Why: Reflects actual supply, critical for allocation.
6.
Minimum Procurement Guarantee (MPG)
o
Definition: A fixed percentage of TP_c that the government must procure at MSP,
regardless of budget constraints.
o
Proposal: Set MPG
at 25% of TP_c
for each crop (adjustable based on policy).
o
Calculation: MPG_c = TP_c × 0.25 (e.g.,
Rice = 1200 × 0.25 = 300 lakh tonnes).
o
Role: Ensures farmers a baseline income, addressing their fear of partial
procurement rejection.
o
Why: Responds to request for a guarantee, boosting farmer trust (e.g.,
Punjab/Haryana farmers who rely heavily on MSP).
7.
Minimum Payout Commitment (MPC_min)
o
Definition: The cost of procuring the MPG for all crops.
o
Calculation: MPC_min = Σ (MPG_c × MSP_b) across
all crops.
o
Example:
§
Rice: 300 × 23,000 = ₹69,000 crore.
§
Wheat: 275 × 24,250 = ₹66,687.5 crore.
§
Total MPC_min = ₹1,35,687.5 crore (for simplicity, only two crops here).
o
Role: Locks in a minimum expenditure, ensuring MPG is met before further
adjustments.
o
Why: Guarantees fiscal priority for farmers’ baseline needs.
8.
Remaining Payout Capacity (RPC)
o
Definition: Budget left after fulfilling MPG, for additional procurement.
o
Calculation: RPC = MPC - MPC_min =
₹3,50,213.6 - ₹1,35,687.5 = ₹2,14,526.1 crore.
o
Role: Allows flexibility to procure more if funds permit.
o
Why: Balances guaranteed support with fiscal limits.
9.
Procurement Proportion Factor (PPF)
o
Definition: A multiplier (0 to 1) to adjust additional procurement beyond
MPG, keeping total payout within MPC.
o
Calculation:
§ Total Potential Payout beyond
MPG , (TPP_x)
= Σ [(TP_c - MPG_c) × MSP_b].
§
If TPP_x > RPC, PPF = RPC / TPP_x; else PPF
= 1.
o
Role: Scales additional procurement equitably.
o
Why: Ensures fairness across crops while respecting the cap.
10.
Adjusted Procurement Quantity (APQ_c)
o
Definition: Total quantity procured per crop (MPG + additional).
o Calculation: APQ_c = MPG_c +
[(TP_c - MPG_c) × PPF].
o
Role: Finalizes procurement, meeting MPG and maximizing within budget.
o
Why: Combines guarantee with flexibility.
11.
Transparency and Dissemination
o
Mechanism: Software publishes MSP_b, TP_c, MPG_c, PPF, APQ_c, and total payout on
portals, shared with farmer unions and departments.
o
Role: Ensures trust and accountability.
o
Why: Aligns with your blog’s call for transparency.
Example
Calculation (Simplified)
- TRB : ₹35,02,136 crore.
- MPC : ₹3,50,213.6 crore.
- Crops: Rice (1200 lakh
tonnes, ₹23,000/tonne), Wheat (1100 lakh tonnes, ₹24,250/tonne).
- MPG : 25%.
- Rice: 1200 × 0.25 = 300
lakh tonnes; ₹69,000 crore.
- Wheat: 1100 × 0.25 = 275
lakh tonnes; ₹66,687.5 crore.
- MPC_min = ₹1,35,687.5
crore.
- RPC :
- ₹3,50,213.6 - ₹1,35,687.5 = ₹2,14,526.1
crore.
- TPP_x :
- Rice: (1200 - 300) ×
23,000 = ₹2,07,000 crore.
- Wheat: (1100 - 275) ×
24,250 = ₹1,99,562.5 crore.
- Total = ₹4,06,562.5
crore.
- PPF :
- RPC / TPP_x = 2,14,526.1 / 4,06,562.5 ≈
0.528.
- APQ_c :
- Rice: 300 + (900 ×
0.528) ≈ 775 lakh tonnes; ₹1,78,250 crore.
- Wheat: 275 + (825 ×
0.528) ≈ 710 lakh tonnes; ₹1,71,925 crore.
- Total = ₹3,50,175 crore
(within MPC).
Surplus
Management Suggestions
For crops
not procured (e.g., 425 lakh tonnes of rice and 390 lakh tonnes of wheat in the
example), surplus management is critical to prevent price crashes. Here are
some suggestions :
1.
FPO-Led Market Linkages
o
Suggestion:
o
Leverage Farmer Producer Organizations (FPOs) to connect surplus to processors and
exporters, as highlighted in the webinar initiative (Hindu BusinessLine, March
27, 2025). For example, Mother Dairy’s pilot to procure 15,000 tonnes of
mustard from Rajasthan FPOs shows a scalable model.
o
How: Government can fund FPOs to aggregate
surplus, process it (e.g., mustard oil), and sell under brands, reducing
middlemen (your blog’s critique of APMC inefficiencies).
o
Why: Raises farmers’ income by bridging the production-marketing gap, as
emphasized in the webinar.
o
2.
Private Sector Partnerships
o
Suggestion:
o
Incentivize companies (e.g., Mother
Dairy, ITC) to buy surplus at market rates or slightly below MSP, with tax
breaks or subsidies.
o
How: Create a “Surplus
Absorption Fund” (e.g., ₹500 crore, inspired by oilseed buffer corpus
ideas) to subsidize private purchases, ensuring farmers don’t distress-sell.
o
Why: My earlier blog stresses private players’ role post-farm laws
repeal; this aligns with that vision.
o
3.
Export Promotion
o
Suggestion: Subsidize export of surplus crops (e.g., rice, pulses) via FPOs or
cooperatives, targeting demand in Asia/Africa.
o
How: Use DCS data to identify
exportable surplus, offer freight subsidies, and streamline certification.
o
Why: Reduces domestic oversupply, stabilizing prices, and echoes your blog’s
call for market-led solutions.
o
4.
Value Addition Clusters
o
Suggestion: Establish 600+ value chain clusters (per National Oilseeds
Mission) to process surplus into products like oil, flour, or feed.
o
How: Fund FPOs/cooperatives to
set up units, as Mother Dairy plans with mustard, scalable to other crops.
o
Why: Turns surplus into profit, aligning with the webinar’s processor linkage
goal.
o
5.
Public Distribution System (PDS) Expansion
o
Suggestion: Distribute surplus grains/oilseeds via PDS, as my earlier blog suggests
reviving edible oil in PDS (discontinued in 2002).
o
How: Procure beyond APQ_c if storage
allows, distributing at subsidized rates to vulnerable families.
o
Why: Manages surplus while addressing food security, a dual win.
Feasibility
and Alignment
- Minimum
Procurement Guarantee:
The 25% MPG
ensures farmers (especially in Punjab/Haryana) a safety net, addressing protest
concerns. It’s fiscally viable (₹1,35,687.5 crore is ~39% of MPC in the
example).
- Surplus
Management:
FPO-led initiatives and private partnerships reflect the webinar’s focus on
sustainability and my earlier blog’s
push for market reforms over government monopoly.
- Software:
Automates all calculations, publishing results transparently, fulfilling the
desirability of an undisputable system.
My Earlier 42
Blogs / E Mails on this subject :
Ø My
Agriculture Related Blogs ( up to 02 Jan 2025 )