India’s central government has approved the Minimum Support Price (MSP) for kharif crops for the 2023-24 season, aiming to offer just compensation to farmers. However, farmer organizations have raised concerns that the increase does not keep up with escalating input costs. MSP is a guaranteed amount provided to farmers when the government procures their produce. The government declares MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
How is MSP Determined?
The MSP is determined based on recommendations from the Commission for Agricultural Costs and Prices (CACP), which assesses factors like cost of production, demand and supply, market price patterns, and inter-crop price parity. The Cabinet Committee on Economic Affairs, presided over by India’s Prime Minister, makes the final decision on MSP levels. The MSP aims to assure growers of profitable prices for their goods while promoting crop diversity.
Kharif Crops Overview
Kharif crops are cultivated during the rainy season, from June to September, with major crops including paddy, maize, millets, pulses, oilseeds, cotton, and sugarcane. These crops account for approximately 55% of India’s total food grain output.
MSP for Kharif Crops in 2023-24
The central government states that the spike in MSP for kharif crops in 2023-24 aligns with the Union Budget 2018-19 declaration to fix the MSP at least 1.5 times the All-India weighted average cost of production. In that period, the MSP has been increased for all 14 kharif crops between 5.3% to 10.35%, with the absolute increase ranging from Rs 128 to Rs 805 per quintal.
Farmer’s Concerns on MSP
Farmers have noted that the production cost used by the CACP to calculate MSP (A2+FL costs) overlooks expenses such as land rent, loan interest, and family labor. They argue that MSP should reflect comprehensive production costs (C2), in line with the Swaminathan Commission recommendations. Additionally, they contend that MSP fails to mirror actual market conditions or inflation trends; it should be linked to the wholesale price index (WPI) or consumer price index (CPI) to guarantee fair farmer returns. Doubts about the procurement system and adequate infrastructure and storage facilities also persist among farmers.
Farming Costs Explained
The ‘A2’ production cost includes all cash and kind outlays directly spent by the farmer on items like seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc. ‘A2+FL’ covers A2 plus an imputed value of unpaid family labour. ‘C2’, a more comprehensive cost, factors in rentals and interest forgone on owned land and fixed capital assets, in addition to A2+FL.
Technological Solutions for Agriculture
Adopting advanced technologies like precision agriculture, IoT, and remote sensing can help maximise crop yields, lower production costs, and increase farmers’ access to information.
Crop Diversification and Innovative Farming Practices
Encouraging farmers to grow high-value and climate-resilient crops can reduce their reliance on MSP for traditional crops. Innovative farming practices like organic farming, vertical farming, and hydroponics can help farmers tap into niche markets and earn higher profits.
Increasing Importance of Public-Private Partnerships
Partnerships between the government, private sector, and farmer organizations can create market linkages, enhance value addition, and improve farmers’ bargaining power. Initiatives can include contract farming, agri-logistics infrastructure development, and agro-processing units to ensure a fair and remunerative market for farmers.
