Rabi Crops Trading much above MSP, Determining Support Price for Kharif Major Challenge for Govt

With Rabi crops trading much higher than the MSP, the fixing of the MSP for the upcoming Kharif Marketing Season is thought to have become a major challenge for the Centre, which is aiming for better rice procurement to compensate for lower wheat procurement in the Rabi Marketing Season.

Experts predict a higher-than-normal acreage of Kharif crops this year, based on a positive outlook in the agricultural commodities market, assuming weather conditions remain favourable.

Though increased acreage and production are expected to provide relief to consumers and policymakers struggling with skyrocketing inflation, sources indicate a certain quandary in determining the year's base price.

Notably, the Commission for Agricultural Costs and Prices (CACP) makes recommendations to the government on MSPs for various crops based on a formula that includes costs directly incurred by farmers such as seeds, fertilizers, pesticides, hired labour, leased-in land, fuel/diesel, and irrigation.

Given the significant increase in input costs, a higher-than-usual MSP of grains, including paddy, is expected this year, which will be beneficial to farmers. Higher MSPs, on the other hand, will not only increase the Centre's procurement costs for welfare programmes, but will also have an impact on the market, availability, and selling patterns.

"The government must protect the interests of both farmers and consumers," officials say.

Following a reduction in wheat procurement during the Rabi season, the Centre reduced wheat allocation to several states and UTs under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which is being compensated with rice to maintain the overall figure.

In order to continue the free food grain distribution scheme beyond September, the government will also need to purchase additional rice.

Notably, wheat procurement through the central pool has been reduced compared to last season, as traders offered farmers prices higher than the MSP. In the current RMS, procurement fell by more than half to 19.5 million tonnes, resulting in a series of decisions concerning wheat export.