Ahead of sowing and Kharif MSP revealed

Subject: economy

Section: Agriculture

The Union Cabinet in June raised the minimum support price (MSP) for paddy by Rs 100 a quintal for the Kharif season of 2022-23.
The Cabinet Committee on Economic Affairs increased the MSP for all mandated Kharif crops for marketing season 2022-23.
The rates for 14 crops have been increased in the range of 4% to 8%.
Paddy is the main Kharif crop, the sowing of which has already begun.

The MSP for paddy (common), which was Rs 1,940 a quintal in 2021-22, and paddy (grade A), which was Rs1,960 a quintal, had increased by Rs 100
The highest increase had been for two varieties of jowar at the rate of 8%. And the lowest increase of Rs 92 had been for maize, whose price was Rs 1,870.
The present increase comes against the backdrop of spiraling input rates, especially due to a sharp increase in fertilizer rates.

Minimum Support Price

The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers.
MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”.

Crops under MSP

The 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.
The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other commercial crops.
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 for Recommending the MSP

The CACP considers various factors while recommending the MSP for a commodity, including cost of cultivation.
It takes into account the supply and demand situation for the commodity, market price trends (domestic and global) and parity vis-à-vis other crops, and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors.

Three Kinds of Production Cost

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’: It is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.
CACP considers both A2+FL and C2 costs while recommending MSP.
CACP reckons only A2+FL cost for return.
However, C2 costs are used by CACP primarily as benchmark reference costs (opportunity costs) to see if the MSPs recommended by them at least cover these costs in some of the major producing States.
The Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by CACP.