DELAY IN ANNOUNCING MSP FOR ONGOING RABI SEASON

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• Farmers’ organisations have questioned the delay in announcing the minimum support price (MSP) for crops in the ongoing Rabi season even as sowing has started in several States.
• Farmers point out that announcing the MSP is important so that they can select the crops that have to be sown during the season.
• Shamli-based farmers leader Jitender Singh Hudda urged the Centre to implement the Swaminathan Commission formula to decide the MSP and include comprehensive input cost, including rental value of land plus 50%.
• “The input cost for fuels, seeds, fertilizers, pesticides, labour and transportation has increased. Agricultural instruments and their maintenance have also become costly
• The RSS-affiliated farmers’ outfit BharatiyaKisan Sangh (BKS) said it was not consulted either by the Commission for Agricultural Costs and Prices (CACP) or the Centre this time.
• “Earlier, there used to be two members representing farmers in the CACP. Now, there are no members representing farmers, and the MSP is calculated based on available statistics before the government.
• All-India Kisan Sabha president Ashok Dhawale said the CACP generally send invitation for discussion.
• “We placed our opinion when the CACP consulted us before the Kharif sowing. However, we believe that whatever consultations held on MSP were a mere formality so far.
• He added that there was tremendous increase on the input price, particularly insecticides and fertilizers.
• The MSP has to be hiked a lot if some kind of a justice has to be done to the farmers.
• The Centre should have announced the MSP in September itself. Otherwise, how will the farmer decide what should be sown and what should not be.
• They should have the MSP figures before them to take a decision

MSP

• The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers.
• MSP is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”.

Crops under MSP:

• The Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
• CACP is an attached office of the Ministry of Agriculture and Farmers Welfare.
• The mandated crops include 14 crops of the kharif season, 6 rabi crops and 2 other commercial crops.
• In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.

Factors for Recommending the MSP:

• The CACP considers various factors while recommending the MSP for a commodity, including cost of cultivation.
• It takes into account the supply and demand situation for the commodity, market price trends (domestic and global) and parity vis-à-vis other crops, and implications for consumers (inflation), environment (soil and water use) and terms of trade between agriculture and non-agriculture sectors.

Three Kinds of Production Cost:

1. The CACP projects three kinds of production cost for every crop, both at state and all-India average levels.
2. ‘A2’: Covers all paid-out costs directly incurred by the farmer in cash and kind on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc.
3. ‘A2+FL’: Includes A2 plus an imputed value of unpaid family labour.
4. ‘C2’: It is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets, on top of A2+FL.

CACP considers both A2+FL and C2 costs while recommending MSP.

CACP reckons only A2+FL cost for return.

• However, C2 costs are used by CACP primarily as benchmark reference costs (opportunity costs) to see if the MSPs recommended by them at least cover these costs in some of the major producing States.
• The Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by CACP.

SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB