Context:
The Union Cabinet approved the increase in the Minimum Support Prices (MSP) for all 14 Kharif Crops grown during the 2024-25 season.
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- This is good news for farmers because MSP acts as a safety net, ensuring they get a fair price for their crops.
- The highest absolute increase in MSP over the previous year has been recommended for oilseeds and pulses viz. niger seed followed by sesamum and tur/arhar.
- Farmers can expect to receive around Rs 35,000 crore more than last season.
- The increase in MSP for Kharif Crops for Marketing Season 2024-25 is in line with the Union Budget 2018-19 announcement of fixing the MSP at a level of at least 1.5 times of the All-India weighted average cost of production.
- This MSP hike is part of a government plan to ensure farmers get at least 50% more than their production costs.
- However, currently, only bajra (77%), arhar dal (59%), maize (54%), and black gram (52%) have MSPs that reach this target.
Minimum Support Prices (MSP)
- MSP is a minimum price set by the government to protect farmers from price drops during times of plenty or bumper production years. It’s like a guaranteed minimum wage for crops.
- The MSP is announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP)
- The government announces MSP for 22 crops, including 14 Kharif, 6 Rabi, and 2 commercial crops. Sugarcane has a separate FRP (Fair and Remunerative Price) which aims to be a more comprehensive measure of production costs compared to MSP.
How is MSP calculated?
The government considers various factors when deciding MSP, including:
- A2 Cost: This covers all the expenses a farmer incurs, like seeds, fertilizers, labor, etc.
- A2+FL Cost: This adds the value of the farmer’s family’s labor to A2 cost.
- C2 Cost: This is the most comprehensive cost, including A2+FL, rent for leased land, and interest on investments.
- Swaminathan Commission / The National Commission on Farmers (NCF) (2004) recommended that the MSP should at least be 50 percent more than the weighted average CoP, which it refers to as the C2 cost to ensure farmers earn a decent profit. The government is working towards achieving this goal.
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