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Kharif sowing season begins but government yet to declare MSPs

MSP is a key farm price policy that affects crop choices of farmers and food production

india Updated: Jun 23, 2018 07:38 IST
Zia Haq
Zia Haq
HindustanTimes, New Delhi
Kharif sowing season,Kharif crop,MSPs
. This year, the government has announced its decision to set MSPs that are 1.5 times the cost of production.(AP File Photo)

The Centre is yet to announce the federally fixed minimum support prices (MSPs) for 23 crops for the kharif (monsoon) season, despite the onset of summer sowing in many states. MSPs are crucial because they serve as “price signals” for farmers and influence their sowing decisions.

Usually, MSPs for summer crops are announced by the second week of June. This year, the government has announced its decision to set MSPs that are 1.5 times the cost of production. However, the proposal has not come up before the cabinet so far.

“I wouldn’t call this a delay. There have been instances in the past when kharif MSPs have been announced by June-end,” an agriculture ministry official said, requesting anonymity. The official said the MSPs could come up for the Cabinet’s approval next week.

In 2017-18, the government announced kharif MSPs on June 7, while in the previous year, they were announced on June 1. In 2014-15, an election year, they were announced on June 25.

MSP is a key farm price policy that affects crop choices of farmers and food production. For instance, during the United Progressive Alliance (UPA) years, higher MSPs for wheat and rice drove more farmers to grow these two crops, causing a shortage of commodities such as pulses. MSPs are meant to serve as floor prices for private traders, thereby helping avoid distress sales.

Despite bumper harvests in the past two years, farmers have faced agrarian distress mainly because of a crash in commodity prices, which have ruled below MSPs. To woo farmers, the Narendra Modi government has promised farmers that it will raise crop prices and also ensure that farmers get actual MSPs for 23 crops.

The possibility of higher kharif MSPs this year has raised concerns of inflation. In their last review of monetary policy, all six members of the Reserve Bank of India’s monetary policy committee agreed that there were upside risks to inflation due to the government’s impending decision on hikes in MSP.

According to farm minister Radha Mohan Singh, in deciding on the MSPs, the Centre would use the “prevailing method” called “A2+FL” to calculate cultivation costs. This includes all out-of-pocket expenses of farmers plus the value of family labour used. Farmers organisations have been demanding the use of “C2”, which also includes imputed costs of capital and rental on land. Then finance minister Arun Jaitley had also stated in Parliament on February 9 that the government would use A2+FL.

“The key challenge is to have MSPs that would not knock inflation too high. MSPs that are too high may price Indian crops out of the international market. It’s important to remember that exports are crucial to farm income. These considerations could be the reason for the delay,” said farm economist Yoginder Alagh.

First Published: Jun 23, 2018 07:37 IST