Annual washing allowance of government servants more than net income of farmers

Government needs to take a more realistic approach to cost of living when deciding on MSP for farmers

Devinder SharmaDevinder Sharma   1 Aug 2018 11:05 AM GMT

Annual washing allowance of government servants more than net income of farmers

This is how it works. Officers of Supreme Court get Rs 21,000 per year as 'washing allowance' at a time when Economic Survey 2016 tells us that farmers' in 17 States or roughly half the country have a net income of Rs 20,000 per year. This makes me wonder don't the farmers have clothes to wash? Not only 'washing allowance', employees also get a family planning allowance, which includes the cost of condoms. When was the last time you heard a family planning allowance included in the computation of the Minimum Support Price (MSP) for farmers?

The gross anomalies in income distribution across various sections of the society don't end here. Take for instance the Minimum Support Price (MSP) the government has announced for 14 kharif crops with much fanfare. It includes out of the pocket expenses incurred by farmers in crop cultivation (A2 cost) plus the cost of hiring farm labour (FL), including family labour, a farmer employs. In addition to this cost, which is labelled as A2+FL, the government claims the MSP for kharif crops it has announced provides for 50 per cent profit over the costs incurred by farmers.

While the new formula to work out MSP for farmers is simply a concoction of the comprehensive cost (C2) analysis done by the Commission for Agricultural Costs and Prices (CACP), which was the true basis of Swaminathan Committee's recommendations, the notional increase in prices is being projected as 'historic' entailing an additional burden of Rs 15,000-crores. Compare this with the recommendations of the 7th Pay Commission for the 45-lakh central government employees and 50-lakh pensioners, which bring in an additional expenditure of Rs 1.02-lakh crore every year. Further, a study by Credit Suisse Bank shows that when the 7th pay Commission recommendations are implemented across the states, the total annual financial impact will soar to anything between Rs 4.5-lakh crores to Rs 4.80 lakh crores.

No one has questioned where the money will come from nor has any economist raised the flag over worsening fiscal deficit. But questions are being asked from where Rs 15,000-crore for kharif MSP will come from. This equals almost the DA instalments that are paid annually to central government employees. No one has ever questioned where the money comes for paying DA instalments, year after year. The bias against farmers is clearly visible.

While the minimum pay in government stands at Rs 18,000 per month, the overall increase in monthly salary over Business As Usual scenario has been computed at 23.55 per cent. In addition, employees get a total of 108 allowances. While most of these allowances cater to defence, para-military and railways, the kind of allowances that employees get makes for interesting reading. No wonder, of the total financial impact the pay increase will have, the increase in pay would be Rs 39,100-crore, increase in allowances would be Rs 29,300-crore. Allowances, therefore, form a very significant proportion of the monthly salary.

Since the basic pay had been revised upwards, the commission had recommended House Rent Allowance to be paid at 24 per cent, 16 per cent and 8 per cent for the Class X, Y and Z cities. When was the last time you heard of the cost of production for farmers also including a house rent allowance (even if it is 10 per cent over the A2 cost), an educational allowance, a medical allowance and a travelling allowance? Numerous studies have shown that whenever a member of a small farmer's family falls sick, the family slides below the poverty line. Roughly 40 per cent of the otherwise paltry income a farmer earns goes towards his family's health expenses. Have we ever given a thought to how difficult it must be for farmers to afford a decent education for their children?

Just to illustrate, in a suicide note left behind by a 22-year-old graduate student, Gopal Babarao Rathod, son of a small farmer from Yavatmal in Maharashtra, who died in August last year, a poignant question he posed tells us how skewed has been the income policy. In his letter he explained how the rural youth, like their lucky counterparts in the cities, too carry an aspiration. He asked: "A teacher's son can easily afford to pay a fee of Rs 1-lakh to become an engineer but tell me how a farmer's son can afford so much fees?" He then went on to say "why is it that the salaried employees get dearness allowance (DA) without even asking for it whereas farmers are denied adequate compensation for their produce?"

Using the income parity norms, I had earlier worked out the quantum jump in basic salaries for employees vis a vis the MSP farmers receive. Just to refresh your memory, here is what I had said. In 1970, at a time when teacher's salary was Rs 90 a month, the MSP for wheat was Rs 76 per quintal. Forty-five years later, in 2015, the MSP for wheat was Rs 1,450 per quintal, an increase of 19 times. For the same period, I examined the increase in basic salary plus DA (not adding the allowances) of different sections of employees. For government employees, the increase was 150 to 170 times; for college/university lecturer/professors it was 150 to 170 times and for school teachers the increase was 280 to 320 times.

In other words, farm incomes have remained almost static. This is substantiated by the recent OECD study which says farm incomes had remained frozen in the past two decades. It clearly shows that farmers continue to be denied their rightful income. No the question that needs to be addressed is how to ensure that farmers too receive an MSP which brings in parity with the salaries of government employees. I think the best way is to entrust the job of working out the real cost of growing food to the institution of cost accountants. They work out the cost of industrial products, and I haven't seen any industry cribbing over the final cost, including the profit margins. My suggestion therefore is that instead of economists, the Commission for Agricultural Costs and Prices (CACP), which is responsible for working out the crop prices, should now be headed by a cost accountant.

(The author is a well-known food and investment policy analyst, this is his personal opinion. His Twitter handle is @Devinder_Sharma click here to read all his articles.)

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