MSPs are federally fixed floor prices for crops for government purchases aimed at avoiding distress sale by farmers and signalling a benchmark rate for private traders.(Pratham Gokhale/HT Photo)
MSPs are federally fixed floor prices for crops for government purchases aimed at avoiding distress sale by farmers and signalling a benchmark rate for private traders.(Pratham Gokhale/HT Photo)

Cabinet clears hike in kharif crop MSPs

The new rates come amid ongoing protests by farmers, especially from Punjab, Haryana and Uttar Pradesh, who want the government to scrap three agricultural laws passed in September 2020 and offer a legal backing for MSPs.
By Zia Haq, Hindustan Times, New Delhi
UPDATED ON JUN 10, 2021 01:52 AM IST

The Union Cabinet has raised minimum support prices (MSPs) of summer-sown crops, increasing them by 1.8% and 6.7%, in keeping with a policy to offer farmers at least 50% returns over the cost of cultivation, agriculture minister Narendra Singh Tomar said on Wednesday.

The new rates come amid ongoing protests by farmers, especially from Punjab, Haryana and Uttar Pradesh, who want the government to scrap three agricultural laws passed in September 2020 and offer a legal backing for MSPs.

The MSPs announced on Wednesday are geared toward nudging farmers to shift away from plentiful cereals, by setting higher prices for oilseeds and pulses, whose output and supply are relatively scarce. For instance, India imports up to two-thirds of its vegetable oil to meet domestic demand.


“We have been saying all along that there should be no doubt over MSP. The MSP system has been there and will be there,” Tomar said. The new rates will offer returns of between 50% and 62% over cost of cultivation, he said.

MSPs are federally fixed floor prices for crops for government purchases aimed at avoiding distress sale by farmers and signalling a benchmark rate for private traders.

The agriculture minister said the government has not closed the doors on negotiations with protesting farm unions. “We are willing to talk and are committed to farmers’ welfare. We had 11 rounds of talks. We have appealed to the farmers to point out specific objections in the legislation. Neither any opposition leader in the House (Parliament) nor the protesting farmers have come up with any specific objection,” Tomar said.

The government buys large quantities of cereals from farmers at MSP rates and distributes them to beneficiaries through the public distribution system at subsidised rates. This is primarily how farmers benefit from the MSP system. However, sales to other buyers can be at prices that are either above or below MSPs.

Farm economist KS Mani, a former faculty with the Tamil Nadu Agricultural University, said he broadly agreed with the pricing differential between produce that are abundant and those in short supply. “The underlying aim is crop diversification. This will work if the government also buys oilseeds and pulses in sufficient quantities.”

Among key crops, MSP for paddy has been raised from 1,868 to 1,940 a quintal, a hike of 3%. The rates for coarse cereals jowar and bajra were hiked by 118 to stand at 2,738 and 2,250, which translates to a raise of 21% and 5%, respectively. The prices of urad, a lentil, has been increased sharply by 300 to stand at 6,300 a quintal.

The highest increase over the previous year was for sesamum, an oilseed, whose MSP was raised by 452 a quintal, to stand at 7,307 a quintal, up from 6,855.

The next largest increase were for two lentils, tur (pigeon pea) and urad (black gram) , whose MSPs were increased by 300 a quintal each. Prices of groundnut and nigerseed have been increased by 275 per quintal and 235 a quintal, respectively. In all, prices were raised by up to 62%.

To fix MSP, the government uses a measure of cost, called A2 + FL, which refers to the cost of cultivation plus the value of family labour.

Farmers have been demanding a legal guarantee for MSP that is calculated using a broader and more comprehensive measure of costs called C2, which includes the assumed cost of capital invested, including machinery, and rent on land.

“Across crops, the increase in absolute numbers doesn’t even match the inflation rate,” said Kavitha Kuruganti, a farm activist. “The government is doing its usual trickery on farmers. First, they did not use the C2 cost concept and used A2+FL. In maize, the increase is as low as 20 per quintal, compared to last year. MSPs are meaningless if the government cannot ensure that all farmers get at least this price. That is where the demand for a legal guarantee comes in.”

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