Govt hikes rabi MSPs, sharper raise for oilseeds

The new assured rates, announced a fortnight earlier than usual, come amid widespread protests by farmer groups against a set of agricultural laws, which farm unions allege will erode the MSP system.

New Delhi The union Cabinet on Monday announced higher minimum support prices (MSPs) for a range of winter-sown or rabi crops, setting them at 50% over costs of cultivation, with sharper increases for oilseeds, which are scarce, than cereals.

A farmer working in his field planted with wheat, a rabi crop. (Representational image/HT Archive)

The new MSPs were approved at a meeting of the Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi.

The new assured rates, announced a fortnight earlier than usual, come amid widespread protests by farmer groups against a set of agricultural laws, which farm unions allege will erode the MSP system.

For wheat, the main winter staple, the government has raised MSP by ₹40 to ₹2,015 rupees a quintal (100kg) and barley by ₹35 to ₹1,635 a quintal. That works out to an increase of 2% and 0.76% respectively. This in line with the government’s policy to recommend moderate hikes for big cereals because of gluts. For instance, in the previous year too (2021-22), wheat prices were raised by about 2.2%, while barley was hiked by about 0.69%.

The MSP on lentil (masur), rapeseed/mustard have been hiked by ₹400 a quintal each, while gram rates were hiked by ₹130 per quintal and safflower by ₹114 per quintal -- 7.8%, 8.6%, and 8.3% higher than the current rates.

The ₹400 hike in rapeseed/mustard works out to a 100% return over costs if the commodity sells for that price in markets. The safflower seed rate, which now stands at ₹5,441 compared to ₹5,327 per quinatl in the previous season, works out to a 50% return over cultivation costs, calculations show. This works out to a 2.1% increase.

MSPs are federally determined floor prices for crops aimed to avoid distress sale by signalling a minimum rate to private traders. The MSP system tends to benefit cereal growers more because the government, through the state-run Food Corporation of India, buys large quantities of cereals at MSP rates and distributes them to beneficiaries via the public distribution system.

“The government has rightly kept hikes in cereal MSPs at a moderate level. This is aimed at crop diversification,” said Abhishek Agrawal, an analyst with Comtrade, a commodities trading firm.

The new lentil rate works out to a 79% return over costs, while that of Bengal gram should give a return of 74%.

“If the government shifts from buying token quantities of oilseeds to procuring sufficiently large amounts then farmers will benefit,” said KS Ravi, a former economist with the Tamil Nadu Agricultural University.

The government uses a measure of cost of cultivation known as A2+FL, which includes all paid-out costs, plus the value of family labour. Farm unions protesting the government’s agricultural policies want authorities to adopt wider measures that include the notional value of owned capital and rent on land.

“The decision will ensure remunerative prices to the growers for their produce. The hike is in line with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5 times of the all-India weighted average cost of production, aiming a reasonably fair remuneration for the farmers,” a government statement said.

The government usually raises minimum support prices of crop twice a year, once ahead of the winter-sown or rabi season and the second time for the summer-sown kharif season that usually begins in June.

“The differential remuneration (varying hikes in MSP) is aimed at encouraging crop diversification. This increase in MSP is in line with the recommendations of Swaminathan Commission,” a farm ministry official said, requesting anonymity.