New Delhi : The Centre is set to radically increase the minimum support price (MSP) for Kharif crops as a move to fulfill its budget promise and address farmers’ concerns about the cost of crops.
The Cabinet Committee on Economic Affairs (CCEA) meeting has been scheduled for 10.50 am on Wednesday, to approve the support price of Kharif crops, and the MSP for paddy is likely to rise sharply by Rs 200 to Rs 1,750 per quintal to honour the budget announcement to ensure that farmers get at least 1.5 times of the production cost.
The cost of the revised MSP is estimated to be around Rs 33,500 crore.
Minimum support price is a form of market intervention by the government to insure farmers against any sudden fall in agricultural produce prices. The MSP is a guaranteed price for their produce from the State.
Among 14 Kharif (summer-sown) crops, the maximum hike in the MSP is likely to be in case of ragi as per the revised MSP, which is expected to be increased by Rs 900 to Rs 2,700 per quintal for 2018-19 crop year (July-June), sources said.
Last week, Prime Minister Narendra Modi had announced that the Union Cabinet will approve the increase in MSP to at least 1.5 times of the production cost in the forthcoming meeting.
Paddy is the main kharif crop, the sowing of which has already begun with the onset of the southwest monsoon.
“In some of the kharif crops where the MSP is already 1.5 times of the production cost, the increase will be minimal. But there will a sharp increase in crops like paddy, ragi and moong, whose MSP are well below the 150 percent of the input cost,” an official source said.
The MSP decided in Wednesday’s meeting will largely apply to paddy and pulses but will benefit ‘nutri-cereals’ like millets the most. The added cost of MSP is 0.2 percent of GDP, according to the cabinet note. The share of paddy in the additional outgo will be around Rs 12,300 crore, Among millets, ragi will see a maximum hike of over 52 percent compared to its current MSP, followed by 42 percent for jowar, and 36 percent for bajra. The hike in MSP of nigerseed (oilseed) and moong (pulse) is also expected to be higher.
A range of crops will be covered by the latest MSP, unlike the usual focus on rice and wheat. A procurement mechanism is to be announced later. The highest priority, in calculating the cost of production, has been given to labour, which is about 53 percent while other costs like fertilisers, farm animals, pesticides, seeds and irrigation make up the remaining.
the government has delayed the announcement of MSP of kharif crops, the sowing of which has already begun, as it was weighing whether to take such a big political decision considering the huge financial burden on the exchequer.
Farm experts are of the view that the sharp increase in the paddy MSP could further boost India’s rice production, which touched an all-time high of 111 million tonnes in 2017-18 crop year and the output is much more than the domestic demand, the report said.
The cultivation of paddy, which is a water-guzzling crop, needs to be discouraged and not promoted, they said, adding that higher rice production will lead to increase in government procurement and swelling of the food subsidy bill.
this massive hike in MSP for paddy comes in the election year of the Narendra Modi government. This hike assumes significance given that it covers the crop which constitutes over 50 per cent of the total acreage of food grain crops during Kharif season.
This move is expected to put an additional burden of an estimated Rs 12,000 crore on account of procurement based on records of procurement in previous years.
During the announcement of the budget in February 2018, Arun Jaitley had said that the insurance of MSPs of kharif crops at 1.5 times their costs will be based on the A2+FL costs, and not the more ambitious C2 costs formula favoured by farm scientist MS Swaminathan, Financial Express reported.
The A2+FL formula takes into account actual cost plus the imputed value of family labour in the production of a crop. But the C2 formula factors in a lot of costs, including imputed rent on land and interest on capital, which makes the cost of production much higher.
The move comes as a way to address farmers’ distress as major nationwide protests with various demands have taken place this year. However, only an increase in the MSP may not be the solution.
Ramesh Chand, Niti Aayog member and key advisor to the government on farm policy said, “Higher MSP will surely raise farmers income but MSP alone is not a solution to generate adequate income for all category of farmers.” He added that the move may be beneficial for large or medium farmers due to their high volume of produce, but not as much for small and marginal farmers.
Bureau Report
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