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Aspects of the Political Economy of Crop Incomes in India
Abstract
This article intends to evaluate at the farm level, the nature of variation of output prices and input costs in agriculture through the lenses of socio-economic class differentiation. Official systems of the calculation of agricultural costs in India have evolved—with respect to their methodological sophistication and complexity—continuously since the early years of India's Independence. At present, there is a three-tiered system of calculation of input costs for crops, ranging from a base calculation of paid-out costs to a calculation that takes into account the shadow prices of family labor and supervision costs as well as other categories of imputed costs. The study uses detailed information from a unique dataset on agricultural outputs, prices and cost of cultivation for paddy and wheat in five villages of three states of India to (1) estimate actual costs of cultivation and the extent to which minimum support price as declared by the Government of India cover these costs and (2) examine costs of cultivation across socio-economic classes of cultivators. Official statistics deal only with averages across states and all classes, thus ignoring the sharp socio-economic differentiation and inequality prevalent in the Indian countryside.
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The other factors that, according to Commission for Agricultural Costs and Prices (CACP) website, are taken into consideration when determining MSP are the following: (1) changes in input prices, (2) input-output price parity, (3) trends in market prices, (4) demand and supply of that agricultural commodity, (5) intercrop price parity, (6) effect on industrial cost structure, (7) effects on cost of living, (8) effect on general price level, (9) international price situation, (10) parity between prices paid and prices received by the farmers, (10) effect on issue prices and implications for subsidy (http://cacp.dacnet.nic.in/).
For a history of the revolution of this scheme, see Sen and Bhatia (2004) and Surjit (2008).
The 24 crops include 7 cereals (paddy, wheat, maize, sorghum or jowar, pearl millet or bajra, barley, and ragi), 5 pulses (gram, tur or arhar, moong, urad, and lentil or masur), 7 oilseeds (groundnut, rapeseed/mustard, soya bean, seasmum, sunflower, safflower, niger seed), and 5 commercial crops (copra or dried coconut, cotton, jute, sugarcane, and tobacco).
Cost A1 includes value of seed (both home-produced and purchased), value of manures (home-grown and purchased), value of fertilizers, insecticides and pesticides, irrigation charges, hired human labor, hired and owned bullock labor, owned and hired machine charges, marketing expenses, land revenue and other taxes, interest on working capital, depreciation of implements, and farm buildings.
So far, 22 villages have been surveyed under PARI. For this study, we have taken five villages into consideration—Harevli and Mahatwar in Uttar Pradesh, 25F Gulabewala and Rewasi in Rajasthan, and Gharsondi in Madhya Pradesh.
Farm harvest price (FHP) is defined as the average of output prices at which cultivators sold their produce to traders at the village site or nearby market during a specified marketing period after the beginning of the harvest season.
Basmati paddy price varied from Rs 900 to Rs 1800 per quintal. Government of India announced two kinds of paddy prices (MSP), one is for “paddy common” and another one is for “paddy (Fine).” Paddy (F) price is Rs 30 higher than paddy (common).