Decoding the Budget

INCREASING MSP

On February 1, when Finance Minister Arun Jaitley said in the Budget announcement that farmers would get 50 per cent higher minimum support price (MSP) than the cost of production for all crops grown in the current Rabi season (2017-18) and upcoming Kharif season, it should have infused enthusiasm among the country's small farmers. But, it has failed to uplift the spirit of Ramlal Singh, a small farmer from Bihar's Sitamarhi district. Singh is one among the country's 94 per cent farmers who fail to benefit from the MSP pedestal, no matter how high it is, in the absence of assured procurement. Last year, though the government had fixed MSP of paddy at Rs 1,550 per quintal, Singh was forced to sell his produce in the open market for Rs 1,200.

If you think Jaitley's announcement will benefit those who manage to sell their produce at MSP, think again. The government has not defined the cost of production, an aspect which lies at the heart of calculating MSP. The Commission for Agricultural Costs and Prices (CACP), which formulates and recommends MSP, categorises three types of cost of production: A2, A2+FL and C2. A2 represents the actual cost of farming including seeds, fertilisers, and hired labourers. A2+FL represents family labourers in addition to A2. And C2 represents the cost of land rentals or interest on invested capital in addition to A2+FL. As many as 16 agriculture universities and institutions based in 19 states collect data from 10 farms of different sizes every day to ascertain the data related to the cost of production.

The profitability of a farmer varies depending on the formula of CACP he chooses to follow. In 2006, the Swaminathan Commission recommended that MSP should be decided on C2+50 per cent, as it gives the farmer maximum return on his investment. In 2014, the National Democratic Alliance (NDA) came to power promising that it would implement the Commission's recommendation. Even during the Budget announcement, Jaitley claimed that the Union Government has been fulfilling the promise of providing 50 per cent higher MSP than the cost of production for certain Rabi crops. But a calculation by Down To Earth shows that the government is considering A2+FL, and not C2, as the cost of production for calculating MSP.

Probably, this is the reason in 2015, soon after coming to power, the government had filed an affidavit in the Supreme Court saying that it was not possible to provide 50 per cent higher MSP over the cost of production on the grounds of distortion of the market. "The government claims to be providing 50 per cent above MSP, but its own documents show that the income of farmers has been stagnant in the last four years. This Budget is another attempt to lie to 100 million farmers," says Yogendra Yadav, founder of Swaraj India, an umbrella organisation of farmers groups.

The 2018 Budget is a case of another missed opportunity to address the cascading agrarian crisis, which has led to the suicide of a farmer every 40 minutes and 100 farmers leaving agriculture, every day. Instead of dealing with the problem, the government is misrepresenting facts possibly keeping the upcoming elections in mind.

CAN INSURANCE SOLVE OUR HEALTH NEEDS?

Budget 2018 announced the grand National Health Protection Scheme (NHPS) that aims to provide secondary and tertiary health care for free to half-a-billion Indians. This is 40 per cent of the country's population. While the scheme, touted as the world's largest government-funded healthcare programme, is still opaque, the beneficiaries would largely be from the poor and vulnerable groups of our society. Under NHPS, for which the government has announced Rs 2,050 crore, each family would be insured for Rs Five lakh.

The announcement, which appeared too less to benefit the target group, immediately ran into controversy, and analysts wondered who will foot the premium for availing the insurance. The next day, NITI Aayog called a press meet and clarified that the Centre will pay for the premium along with states, for which it will bear a cost of Rs 1,200 per family.

An analysis by Down To Earth shows even by this claim, the NHPS would require Rs 12,000 crore or six times the money assured. Now, let's estimate the amount the government requires to make its grand announcement a success. As of now, the government offers health insurance cover of Rs 30,000 to each of the 300 million families below the poverty line through its flagship scheme Rashtriya Swasthya Bima Yojna (RSBY).

"Both the Centre and the states pay for the premium, which comes to Rs 92 per person or about Rs 500 per family of five," explains Ravi Duggal, country coordinator of the International Budget Partnership, a Washington-based non-profit.

Now if you increase the insurance cover to Rs Five lakh, the premium will rise to Rs 8,333 per family. At this rate, the government needs to spend at least Rs 4,94,400 crore. "Going by the government's previous record, the budget allocation to the new insurance scheme seems more of a public-relations exercise keeping the 2019 elections in mind," says Duggal.

NHPS also misses out on the out-patient requirements of the sick. A research article published in PLOS in November 2016, says that households with an ailing person spend about 10 per cent of their monthly income on OPD treatment. No country, except the US, uses the insurance model to ensure universal healthcare. Even the US struggles to ensure affordable healthcare despite strong regulations for the private healthcare sector. Will India be able to ensure this with its unregulated private healthcare sector?

Besides, insurance under RSBY has a notorious past. For instance in 2012, Down To Earth reported a case in Samastipur district in Bihar, where around 10,000 unnecessary hysterectomies were performed to get insurance money.

While the Budget has made promises on the correct track the method to fulfil these are plenty and uphill. Ultimately, at no cost must the protection of our country's citizens, majority of who continue to be poor, be sacrificed.

(The views are strictly personal)