The farmers have suffered huge losses during the lockdown. In order to provide a relief to the farmers, the government, on June 2, 2020, announced an increase in the MSP (minimum support price) of 14 Kharif crops.
Minimum Support Price (MSP) is a form of market intervention by the government to insure agricultural producers against any sharp fall in farm prices. Paddy is a widely-grown Kharif crop, and the government has increased the MSP of paddy by Rs 53 per quintal to Rs 1,868 per quintal (100 kgs) for the 2020-21 crop year.
However, the price of diesel has gone up by more than Rs 7 per litre since the MSP was hiked. A litre of diesel is now more expensive than a litre of petrol after the price of the former was hiked by 48 paise on June 23. A litre of the fuel now costs ₹79.88 as against ₹79.76 for a litre of petrol (Delhi price as on June 24).
On one hand, the government had increased the MSP and claimed that it would provide a relief to the farmers, and, on the other hand, it has increased the price of diesel. So, how does this help the farmers? With the rise in the price of diesel, the cost of paddy would go up further and the increased input cost would lead to a dip in profits.
Gaon Connection spoke to Rajnish Kumar, a farmer, who lives in Manjhipur in Saharanpur district of Uttar Pradesh, to understand how important diesel is for paddy cultivation. Rajnish is all set to cultivate paddy in a total of six acres. He has already sown paddy in about two acres.
He said: “Paddy is a water crop. It needs to be irrigated at least five times despite good rains. Nearly 7-8 hours are spent in irrigating one acre at a time and during this time, 16 to 17 litres of diesel is consumed. So, about 80-85 litres of diesel is consumed towards cultivating the paddy crop in a one-acre land.”
He added: “Before sowing paddy, I have already tilled the entire field four times. The field where paddy is being sown calls for yet another round of tilling on the day of sowing. So, we end up tilling the land five times with a tractor for one crop of paddy and this consumes at least 30 litres of diesel. We have spent a lot more this year than the last year.”
The price of diesel in Saharanpur was Rs 64.39 when the central government announced a hike of Rs 53 in the MSP of paddy on June 2. When Gaon Connection spoke to Rajneesh on June 22, the price of diesel in Saharanpur was Rs 71.67 –between June 2 and June 22, diesel became costlier by Rs 7.24.
On June 22, 2019, the price of one litre of diesel in Saharanpur was Rs 63.66. According to Rajneesh, the total cost of about 115 litres of diesel per acre had come around Rs 7,320 last year, but this year the expenditure would go up to a total of Rs 8,242. Hence, the total spending has increased by Rs 922.
Rajneesh pointed out that if the crop is very good, one acre yields about 24 quintal (2,400 kgs) paddy. Dividing 922 by 24 quintals and comparing this with last year (June 22, 2019), the cost of diesel per quintal has increased by Rs 38.41, while the government has increased the MSP of paddy to Rs 53. In this respect, the farmers will only get Rs 15 more actually, while the government claims to have increased the MSP by Rs 53.
On June 2, the day when the new MSP of paddy was announced, the total price of 115 litre diesel had been Rs 7,404, whereas by June 22, it had gone up to Rs 8,242. Within 20 days, there was a jump of Rs 838. If it is divided by 24 quintals of paddy, per quintal cost will increase by Rs 34.91 — about Rs 35. Deducting this from the MSP hike of Rs 53, it comes to a marginal hike of about Rs 18. This is just an example. The price of diesel varies from state to state within the country. The price of diesel across the country has risen by Rs 9.46 in the last 16 days. Diesel price went up to Rs 78.85 on June 22, 2020 in New Delhi. The same price has reached Rs 71.26 in Gurugram, Rs 77.24 in Mumbai, Rs 76.30 in Chennai, Rs 77.06 in Hyderabad and Rs 74.98 in Bengaluru. The price of petrol has gone up from Rs 77 to Rs 82. This is for the first time that the prices of petrol and diesel have almost become equal, while the price of crude oil is currently at its lowest level.
Why is diesel costlier despite cheaper crude oil?
The price of diesel-petrol in the country should have been Rs 7 to 8 per litre as per the level at which the price of crude oil was on April 20, 2020. On April 20, while the price of Brent crude oil was around $27 a barrel, the WTI crude price declined by 18 per cent to $1,178 a barrel on the MCX (Multi Commodity Exchange of India). The US crude in the international market was at a price of $15 a barrel. Such a big decline had come up for the first time in 21 years in the US crude.
Brent crude oil was priced at $42.75 per barrel on June 22 and the WTI crude at $3,072 per barrel on the MCX. But the Brent crude oil was priced at $65.20 a barrel on June 22, 2019, last year.
A barrel means about 159 litres of oil. As per this, the price of petrol-diesel should also have been around Rs 20-21 per litre at this time, but the price is much higher. While it was believed that the fall in the price of crude oil would give relief to people.
Crude oil is of two types — brent crude, which is traded from London and the second is the WTI crude, which is traded in the US. The crude oil that India imports is Brent crude.
Diesel has always contributed to increasing the cost of cultivation in India. According to the Economic Survey 2017-18, a total of 14.2 crore hectares of land is cultivated in India. Out of this, 52% is dependent on the irregular irrigation and rain. A report by the Council on Energy, Environment and Water (year 2018) says that about 1.9 million (Rs 1 crore 90 lakh) electric pump sets and about 90 lakh diesel-powered pumps were currently used for irrigation in India.
According to a report by the Agricultural Economic Research Institute, India had a diesel pump set in every fifth field in the year 2013. About 20.51 diesel pump sets are there for every 100 fields. In 2013, the figure was 21.36 per 100 farms. In Uttar Pradesh, Madhya Pradesh and Tamil Nadu, every two fields have a diesel-powered pump set, while Andhra Pradesh, Jharkhand, Maharashtra and Odisha have an average diesel pump set per 50 fields.
On an average, one diesel pump is set up for irrigation in every 13 hectares. West Bengal, Uttar Pradesh, Andhra Pradesh, Telangana, Punjab, Odisha, Bihar and Chhattisgarh are major paddy cultivating states of India.
Thirteen per cent of the amount of diesel consumed annually in the country goes to the agriculture sector, while about 8 to industries and 3 per cent diesel is consumed in railways.
Diesel irrigation pump sets account for 3.33 per cent of the total diesel consumption in the country, while tractors engaged in agricultural operations account for 7.65 per cent of diesel consumption. Around 3.13 per cent of diesel is used in other agricultural activities. This allows us to gauge how harmful the rising price of diesel proves to be for the farmers.
Nrupendra Singh, a farmer from Begawali village in Fazilka district of Punjab, is also concerned about the rising price of diesel. “We have suffered a lot because of the lockdown,” he tells over the phone to Gaon Connection. The rising price of diesel is going to increase our cost substantially. Most of the labourers in our area have gone away, those who are coming back are asking for a lot of money. The wage rate has almost doubled. The cost of paddy has gone up and diesel price hike will increase the cost further. The increase in the MSP is not going to benefit us at all.”
The rising cost of diesel is now being contested. In Uttar Pradesh, Samajwadi Party workers in Chandauli district protested by running tractors upon the fields. In this regard, the former SP state spokesperson Manoj Kaka told Gaon Connection: “The farmers are currently sowing paddy in the field. They have already suffered a lot due to the lockdown, yet the government continues to hike the price of diesel, while the price of petrol and diesel is declining in other countries. The price of crude oil has also come down, yet the government is not giving relief to the farmers.”
