Govt hikes Rabi crops’ MSP minimally

Increase in MSP of wheat is the lowest in the last six years

By Jitendra
Published: Wednesday 23 October 2019

The Indian government hiked the minimum support price (MSP) of Rabi crops on October 23, 2019, in order to encourage farmers.   

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi took the decision. MSP is the rate at which the government buys grains from farmers.

The MSP of wheat, the most important Rabi crop, as well as barley was increased by Rs 85 per quintal, to Rs 1,925 for the 2019-20 Rabi season. Wheat farmers will hence get a return over cost of 109 per cent.

For wheat, this is an increase of just 4.6 per cent than the previous year, which is the lowest since 2014-15, when the new government led by Narendra Modi came to power.

In 2014-15, the increase in wheat MSP was just 3.5 per cent. 

The highest increase in MSP has been recommended for lentils (Rs 325 per quintal), followed by safflower (Rs 270 per quintal) and gram (Rs 255 per quintal), which is a major step towards increasing the income of farmers.

The rate of growth of lentils is 7.5 per cent, which is higher than the previous year.

The MSP of rapeseed and mustard has been increased by Rs 225 per quintal.

The MSP was recommended by the Commission for Agricultural Costs and Prices (CACP), a decentralised agency of the government of India that recommends MSPs to motivate cultivators and farmers to adopt the latest technology in order to optimise the use of resources and increase productivity.

In its cabinet note, government has claimed that this increase in line with the principle of fixing the MSPs at a level of at least 1.5 times of the all India weighted average cost of production (CoP), which was announced in the Union Budget 2018-19.

But the fact is that the government has tweaked the formula to suit its narrative of fulfilment of election promises by increasing MSP by 1.5 times from the cost of production as recommended by the Swaminathan Commission.  

The claim of the government stands nowhere when one compares facts and figures. The profitability can be interpreted on three classifications.

CACP has categorised three types of CoPs: A2, A2+FL and C2. A2 represents actual cost of farming including seeds, fertilisers and hired labours.

A2+FL represents family workers in addition to A2. And C2 represents the cost of land rentals or interest on invested capital in addition to A2+FL. It means that C2 has all the components followed by A2+FL and A2.

It is obvious that any positive gross return value margin on C2 gives better price to farmers than any other category. The Swaminathan Commission recommended C2+50 per cent but the government is providing A2+50 per cent.

Ironically, in 2015 the same government filed an affidavit in the Supreme Court saying that it was not possible to provide 50 per cent higher MSP on the CoP, on the ground of distortion of market.

The previous United Progressive Alliance government had done the same. In 2016, Union Minister for Agriculture, Radha Mohan Singh, had claimed that his government was committed to fulfilling the electoral promise.

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