The Cabinet Committee on Economic Affairs (CCEA) has increased the Minimum Support Prices (MSP) for all Rabi crops for the financial year 2024-25.
Understanding MSP
- Policy Framework: The government’s MSP program was created to protect farmers’ earnings. It is a component of administrative decision-making rather than an entitlement, in contrast to subsidized grains under the Public Distribution System (PDS).
- Commodity MSPs: Based on suggestions from the Commission on Agricultural Costs and Prices (CACP), the Center now sets MSPs for 23 agricultural commodities.
- Absent Legal Support: As of right now, neither a statute nor a regulation requiring their implementation supports this pricing.
Fixing MSPs
- Elements Taken Into Account: The cost of cultivation is one of the many elements that CACP takes into account when suggesting MSP for a product.
- Important factors: These factors include the dynamics of supply and demand, prices on the domestic and international markets, crop parity, effects on consumers and the environment, and terms of trade between the agricultural and nonagricultural sectors.
- The 2018–19 Budget adopted the “predetermined principle,” which states that MSPs should be established at 1.5 times the cost of production. This reduces the responsibility of CACP to only calculate production costs and apply the formula.
Production Cost Calculation
- Three Cost Categories: At the state and national average levels, CACP determines three production cost categories for every crop.
- A2: Includes all expenses paid out to the farmer directly, including labor, gasoline, land lease, fertilizers, seeds, and irrigation.
- A2+FL: Comprises A2 and adds a value to account for unpaid family work.
- C2: A thorough cost accounting that includes A2+FL as well as rentals and forfeited interests on owned land and capital assets.
