MSP
- AGRICULTURE
News: Centre raises minimum support prices
for Rabi crops, farmers unhappy
What's
in the news?
●
The Cabinet Committee on Economic Affairs
(CCEA) has increased the Minimum Support
Prices (MSP) for all Rabi crops for the financial year 2024-25.
●
The increase for wheat, the major Rabi
crop, is ₹150 per quintal and the new price will be ₹2,275.
Minimum
Support Price (MSP):
●
Minimum Support Price (MSP) is a “minimum
price” for any crop that the government considers as remunerative for farmers
and hence deserving of “support”.
●
MSP for a crop is the price at which the government is supposed to procure/buy
that crop from farmers if the market price falls below it.
Origin
of MSP in India:
●
MSP was introduced in the mid-sixties when
India was in food deficit.
●
The government was keen to boost domestic
production through green revolution technologies but realised farmers wouldn’t
plant input-intensive high yielding wheat or paddy varieties unless guaranteed
a minimum price.
Who
recommends MSP?
●
Commission
for Agricultural Costs & Prices (CACP) recommends MSPs
for 22 mandated crops and fair and
remunerative price (FRP) for sugarcane. (CACP is an attached office of the
Ministry of Agriculture and Farmers Welfare. It is an advisory body whose
recommendations are not binding on the Government)
●
The Cabinet
Committee on Economic Affairs (CCEA) (chaired by PM) of the Union
government takes a final decision on the level of MSPs.
Crops
covered under MSP:
●
7 types of cereals (paddy, wheat, maize, bajra, jowar, ragi and barley)
●
5 types of pulses (chana, arhar/tur, urad, moong and masoor)
●
7 oilseeds
(rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower, niger
seed),
●
4 commercial
crops (cotton, sugarcane, copra, raw jute)
●
In addition, the MSPs of toria and de-husked coconut are fixed
on the basis of the MSPs of rapeseed/mustard and copra, respectively.
Factors
considered by CACP while recommending MSP:
While recommending MSPs,
the CACP looks at the following factors:
●
the demand and supply of a commodity
●
its cost of production
●
the market price trends (both domestic and
international)
●
inter-crop price parity
●
the terms of trade between agriculture and
non-agriculture (that is, the ratio of prices of farm inputs and farm outputs)
●
a minimum of 50 per cent as the margin
over the cost of production
●
the likely implications of an MSP on
consumers of that product.
What
are the three kinds of production cost projected by CACP?
The CACP projects three
kinds of production cost for every crop, both at state and all-India average
levels.
●
‘A2’:
Covers all paid-out costs directly incurred by the farmer in cash and kind on
seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation,
etc.
●
‘A2+FL’:
Includes A2 plus an imputed value of unpaid family labour.
●
‘C2’:
Includes ‘A2+FL’ along with revenues forgone on owned land (rent) and fixed
capital assets (interest).