Modi govt raises minimum support prices for crops in bid to woo farmers ahead of 2019 polls | business news | Hindustan Times
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Modi govt raises minimum support prices for crops in bid to woo farmers ahead of 2019 polls

The government on Wednesday hiked the minimum support price for paddy by a steep Rs 200 per quintal as it looked to fulfil its poll promise to give farmers 50% more rate than their cost of production.

business Updated: Jul 04, 2018 23:58 IST
Zia Haq
Zia Haq
Hindustan Times, New Delhi
MSP hike,MSP,MSP for paddy
Prime Minister Narendra Modi interacting with a group of sugarcane farmers, at Lok Kalyan Marg, in New Delhi on June 29, 2018.(PTI Photo)

The Cabinet on Wednesday announced higher minimum support prices (MSPs) for 14 crops, setting each of these at a minimum of 1.5 times the cost of cultivation, as the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government seeks to address distress in the agrarian economy and ensuing farmers’ protests.

The higher support prices — the biggest increase in the present government’s tenure — are likely to increase government expenses by Rs 15,000 crore, home minister Rajnath Singh said.

For the 2018-19 crop season, the MSP for paddy, the main crop planted during the ongoing kharif (summer) season, has been fixed at Rs 1,750 per quintal, 13% higher than last year. This is the steepest hike since 2012-13, when the increase was 15.7%.

The MSP for paddy has been increased by Rs 200 in absolute terms, which constitutes a 50% raise over input costs, or costs of cultivation, of Rs 1,166.

To woo distressed farmers, the government had assured farmers in the Budget for 2018-19 that it would increase MSPs for the summer-sown season so that they get 50% returns over cost. A crash in the prices of several farm commodities, especially pulses and oilseeds, in recent months has led to distress in the rural economy and triggered farmers’ protests in several states. Farmers have earned negative returns on many crops amid record harvests. The MSP hikes also come ahead of elections due in BJP-ruled states like Madhya Pradesh, Chhattisgarh and Rajasthan later this year.

“Farmers weren’t getting adequate returns. They were naturally dissatisfied. Our prime minister understood this. That is why we have taken this historic decision,” Singh said, briefing reporters on the decision.

The home minister said higher support prices would increase the “purchasing power” of farmers, which would have a “wider impact on the economy”. The MSPs were calculated and recommended by the statutory Commission on Agricultural Costs and Prices (CACP).

A statement said the cost yardstick used to calculate the MSP includes all paid-out costs such, such as expenses incurred on seeds, fertilizers, manures, irrigation charges, depreciation on implements, hired human labour, rent paid for leased land and imputed value of family labour. This indicates that the CACP used a prevailing method called “A2+FL”, as opposed to “C2” costs, a more comprehensive measure than includes imputed value of rental on owned land.

The sharpest hikes over the so-called “A2+FL” costs came in a range of crops known as coarse cereals, aimed at correcting prices for small farmers who mostly grow them. The MSP for bajra, or pearl millet, was hiked to Rs1,950, which is a raise of 97% over input costs of about Rs990. The MSP for jowar, or sorghum, has been hiked to Rs 2,430 from Rs 1,700, a hike of 50% over costs.

For arhar, a variety of pulse, the MSP saw a sharp hike of 66% over input costs. The MSP for arhar has been raised to Rs 5,675 per quintal from Rs 5,450, while the input costs for cultivating one quintal of arhar works out to Rs 3,432, according to the CACP.

The support price of moong, another pulse, has been hiked to Rs 6,975 per quintal from Rs 5,575. This is a 50% hike over cultivation costs of Rs 4,650 per quintal. Urad MSP has been hiked to Rs 5,600 from Rs 5,400 per quintal, which constitutes a 62% increase over input costs of Rs 3438 per quintal.

The MSP of cotton (medium staple variety) has been increased from Rs 4,020 to Rs 5,150, which is a 50% increase over input costs of Rs 3,433.The MSP for cotton (long staple variety) has been hiked to Rs 5,450 from 4,320 per quintal.

For pulses, the year-on-year hike for MSP was 4% for arhar, 25% for moong, and 3.7% increase for urad. The new support prices for oilseeds like soybean and groundnut are Rs 3,399 (an 11.4% hike) and Rs 4,890 (9.9%) per quintal.

“When MSPs were much lower earlier, the government could not protect these declared support prices. Given that this is an election year, one feels the government will devise ways, such as higher procurement. But that’s also easy to bungle up. The big challenge (with higher procurement) is how will the government release all these stocks? That mechanism is not known yet,” said Milind Murugkar, a Nashik-based independent farm economist.

First Published: Jul 04, 2018 16:39 IST