Withdrawal of power subsidy entails hike in MSP

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Old 11-Oct-2010
Withdrawal of power subsidy entails hike in MSP

Chandigarh October 11:

The Punjab’s farmer is barely able to balance the cost of cultivation with its returns. Will the withdrawal of subsidies on power mean his losing everything?

Till recently, Punjab’s farmers did not have to pay for electricity or water consumption. The cost of the power consumed by the farmers was borne by the state government. The cultivation cost for the farmers, who have their own land to till, is almost half of what they get at the end as minimum support price (MSP) for the crop.

For the farmers, who do not have their own land to till, the cost of cultivation is almost 85 per cent of what they get in return. In both the cases, it is presumed that the farmer is using his family labour for the crop production. In case of the landless farmers, the cost of renting the land adds to the cost of production.

Experts thus feel that withdrawal of subsidy would mean making agriculture a non-profitable venture for the marginal farmers and the landless farmers. But there are others who differ. “In case, the farmer is not given free power, its cost will be added to the cost of the production and that in turn becomes a ground enough for the state to demand an increase in the MSP from the Centre.

It is important for the Government of India to ensure that the Punjab’s farmers continue to contribute to the Central pool and it will be in their interest to increase the MSP,” said a senior official of the Agriculture Department. There are almost 1.9 lakh farmers, who use tube wells in the state. The government has recently imposed a fixed bill of Rs 50 per BHP per month on the farmers for use of the tube wells. Following this move, it is probably for the first time that state’s subsidy bill went down from where it stood last year.

With the regular increase in power tariff, the subsidy burden on the state has increased from Rs 790 crore in 2004 to Rs 2,800 crore in 2009. In 2010, however, this has come down to Rs 2,700 crore. Under tremendous pressure from the farmer unions, whatever the state gained from the savings on subsidies, it gave back to the farmers in form of the productivity bonus.

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