MSP hike – from dreams to reality

The MSP for Rs 200 will raise common variety paddy, the most important Kharif crop, over last year’s Rs 1,550 per quintal, said the government. That works out a 13 percent increase for the financial year ended March 2019 compared to a 5.4 percent increase in FY18. The year-on-year jump in MSP for most other Kharif crops has also been far steeper than the annual increases announced over the last three years.

Sources said that the agriculture ministry has proposed higher MSP than what has been recommended by the government advisory body Commission for Agricultural Costs and Prices. This was done considering the growing farm distress because of fall in prices of most crops owing to bumper production, they added.

The Cabinet Committee on Economic Affairs will meet today to approve the hike in support prices of kharif crops to honor the government’s promise of ensuring farmers at least 1.5 times the price of the production cost.

The committee is expected to raise the minimum support price for paddy by Rs 200 to Rs 1,750 per quintal, sources told wire agency PTI. Among the 14-Kharif crops, the maximum hike in MSP is likely to be for ragi, which is expected to be increased by Rs 900 to Rs 2,700 per quintal for 2018-19 crop year (July-June), the sources said.

Upholding its budget promise, the cabinet has ensured that the MSP for the Kharif season is 50 percent above the cost of production, Agriculture Secretary Shobhana Pattanayak told BloombergQuint. The formula used for the cost of production is ‘A2 + FL’, which takes into account the actual cost plus imputed value of family labour.

In the Union Budget, the government had assured farmers of a minimum support price of 50 percent above cost as a way to ensure that farm incomes double by 2022. However, at the time, there was no clarity on the cost formula to be used.