Guaranteed MSP will claim half the Budget

Guaranteed MSP will claim half the Budget

Context: Procurement of 23 crops at MSP which will amount to ₹17-lakh cr and to support this annual allocation, rich farmers should pay tax.

What is the farmers ’demand?

  • The protesters have rejected the offer of amendments to farm laws and are firm on their demand for repeal of the three laws.
  • Farmers want MSP guarantee.

Is it feasible to accept demand of MSP guarantee?

  • Not economical: India has about 14 crore farmers (as per PM-KISAN enumeration). Cost of procuring all 23 crops is 50 per cent of India’s annual expenditure
  • Unsustainable burden: The cost of MSP and subsidised food supplies are being met by heavy borrowings from the National Small Savings Fund (NSSF).
  • Rising subsidies: In 2019-20, 11 per cent of the country’s total budget was spent on farmer welfare schemes. Subsidies on food and fertiliser and expenses on irrigation schemes in 2019-20 noticed a 65 per cent jump from 2017-18.
  • Direct benefit: introduction of the PM-KISAN scheme resulted in leap in food subsidy.
  • Rise in procurement: Procurement of food crops including paddy, wheat, pulses and oilseeds under MSP has seen a dramatic increase. For example, compared to 1,395 lakh tonnes of wheat procured between 2009 and 2014, 1,627 lakh tonne of wheat have been procured in the last five years.

What are the other issues?

  • Disparities: MSP’s poor implementation has created problems of equity with large farmers of just two States Punjab and Haryana.
  • Faulty policy: As per CACP, more than 95 per cent paddy farmers in Punjab and about 70 per cent farmers in Haryana are covered under MSP operations. States such as Uttar Pradesh (3.6 per cent), West Bengal (7.3 per cent), Odisha (20.6 per cent) and Bihar (1.7 per cent), have only a minuscule number of farmers benefit from procurement.

Why blanket exemption on taxing agriculture income is bad policy?

  • Agriculture income including that from sale of farmland is exempt under Section 10 (1) of the Income Tax Act, 1961 without any limit.
  • Rich farmers and politically influential people use the provision to convert black money into white.
  • Rich farmers include many corporates who run seed companies and whose profits run into crores.
  • In 2019, a Comptroller and Auditor General report red-flagged the irregularities in exemptions given by the taxman on agriculture income.
  • It said that claims of tax exemption on farm income were given based on “inadequate verification or incomplete documentation” in more than a fifth of the 6,778 cases.
  • Exemption was granted in hundreds of cases where land records or proof of farm income was not available.
  • According to an article published in the Economic and Political Weekly by Govind Bhattacharjee, a retired Director General from CAG, assesses who had reported agricultural of more than ₹5 lakh each between 2014-15 and 2016-17 were 22,195.

The blanket exemption on agriculture income should be stopped and it should continue for roughly 86 per cent of the peasants of the country. The 14 per cent rich farmers should come forward to help the rest get MSP support.

Print Friendly, PDF & Email

Free IAS Preparation by Email

Enter your email address to subscribe to the blog followed by several Rankholders and ensure success in IAS.