The Center has announced an increase in the minimum support price for wheat and five other Rabi crops for the 2024-25 marketing season.Wheat prices have increased by Rs 150 per quintal, the highest level since 2007-2008.Wheat is an important Rabi crop and is the second largest crop in terms of area in India and plays an important role in the economy.
Minimum Support Price
- MSP is the guaranteed amount that is given to farmers when the government buys their crops.
- MSP is based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), which considers various factors such as cost of production, demand and supply, market price trends, inter-crop price parity, etc.
- CACP is an attached office of the Ministry of Agriculture and Farmers Welfare. It came into existence in January 1965.
- The Cabinet Committee on Economic Affairs (CCEA) chaired by the Prime Minister of India takes the final decision (approval) at the level of MSP.
- The objective of MSP is to ensure remunerative prices to producers for their crops and to encourage crop diversification.
Crops under MSP
- CACP recommends MSP for 22 mandated crops and Fair and Remunerative Price (FRP) for sugarcane.
- The specified crops include 14 Kharif season crops, 6 Rabi crops and 2 other commercial crops.
Three types of production costs
- CACP estimates three types of production costs at state and all India average level for each crop.
- ‘A2’: Under this, the direct expenditure incurred by the farmer on seeds, fertilizers, pesticides, labour, land taken on lease, fuel, irrigation etc. is included.
- A2+FL’: This includes ‘A2’ plus an imposed value of unpaid family labour.
- ‘C2’: This is a more comprehensive cost as ‘A2+FL’ also includes rent and interest on land and fixed assets owned by the farmer.
- Both ‘A2+FL’ and ‘C2’ costs are considered by the CACP while recommending the Minimum Support Price (MSP).
- Only ‘A2+FL’ cost is calculated by CACP for return.
- While ‘C2’ costs are used by CACP primarily as a benchmark cost to see whether the MSPs recommended by them cover these costs at least in some major producing states.
MSP required
- Due to two consecutive droughts in 2014 and 2015, farmers faced a continuous decline in commodity prices since 2014.
- Demonetisation and ‘Goods and Services Tax’ have negatively affected the rural economy, mainly the non-agricultural sector as well as the agricultural sector.
- Due to the ongoing recession in the economy after 2016-17 and the subsequent Covid pandemic, the scenario remains dire for most farmers.
- High input prices for diesel, electricity and fertilizers have further added to their crisis.
- This ensures that farmers get fair prices for their crops, which helps in reducing agricultural distress and poverty. This is especially prominent in states where agriculture is a major source of livelihood.