Cabinet approves hike in MSP for kharif crops
The Union Cabinet has approved hikes in minimum support prices (MSPs) for a range of summer-sown crops in keeping with a policy to offer farmers at least 50% returns over cost of cultivation, information and broadcasting minister Anurag Thakur said Wednesday.MSPs are intended to act as a floor price for farm commodities and serve as a benchmark rate in wholesale markets, thereby helping to avoid distress sales. However, MSPs are effective only in a handful of crops which the government buys in large quantities, such as cereals.The increase in floor prices ranges between 50-85% over cost of cultivation, with sharper increases in oilseeds and pulses, which are scarce compared to cereals. The procurement price for the main summer staple paddy (rice) has been raised by ₹100 to ₹2,040 per quintal for the 2022-2023 crop year.Millions of farmers are waiting for the June-to-September monsoon rains to advance into the mainland to begin sowing of summer crops, which account for nearly half of India’s annual food output. MSPs also serve as a key price signal for farmers, which influences sowing decisions.Among key oilseeds, the highest MSP increase was for sesame — 7.1% from ₹7,307 to ₹7,830 a quintal (100kg), an absolute increase of ₹523. The rate for soyabean has gone up from ₹3,950 to ₹4,300 a quintal, an increase of 8.8%, while that for sunflower seed, another scarce key oilseed, was raised 6.4% from ₹6,015 to ₹6,400 a quintal.
India imports up to two-thirds of its cooking oil, made from oilseeds, whose global supplies have been disrupted due to the Ukraine war and last month’s ban on exports by Indonesia that has since been reversed. This pushed up import costs for India.The rates for key lentils such as tur, moong and urad saw increases of between 50-60% over the cost of cultivation. The MSP for tur (arhar or pigeon pea), the most commonly consumed pulse, was hiked from ₹6,300 to ₹6,600 a quintal, a rise of 4.7%. Moong (green gram) prices were hiked from ₹7,275 to ₹7,755 a quintal, a raise of 6.5%. The MSP for pearl millet or bajra saw an increase of 4.4% from ₹2,250 to ₹2,350 a quintal.“Since 2018-19, the Modi government has followed the principle of fixing MSP at least 50% over cost and the increases have benefited farmers through higher procurement. The government has also increased the fertilizer subsidy to ₹2.10 lakh crore. We haven’t let any burden of higher costs to fall on farmers,” Thakur said while briefing the media.The government buys large quantities of cereals from farmers at MSP rates. This is primarily how farmers benefit from the MSP system. On the other hand, it buys only token quantities of other produce such as oilseeds and pulses. The quantum of oilseeds and pulses procured are no more than 2.5% of total produce, official data shows. This means the government’s intervention in the markets does not quite improve rates in these crops.“The government has consistently made higher increases in MSPs for oilseeds and pulses to encourage crop diversification. Procurement of these crops has also gone up over the past eight years but not enough to nudge a large number of farmers away from cereals,” Ashok Agrawal of Comtrade, a commodities trading firm said.The cost of cultivation of major crops varies across states, while MSPs are based on a weighted all-India average, another reason farmers don’t get guaranteed profits.
ABOUT THE AUTHOR
Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.
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