Amidst the uproar across the country over the two farm Bills introduced by the NDA government in the Parliament, the Centre has announced the Minimum Support Price (MSP) for upcoming Rabi season. Considering the fact that the MSP should be 1.5 times of the cost of cultivation, the MSP for all the Rabi crops is raised in the range of two per cent to seven per cent. Pulses and oilseeds had received biggest rise in the MST with lentil (masur) getting hike of Rs 300 per quintal at Rs5,100 per quintal, which is higher by 1.78 per cent of cost of cultivation. Chana MSP is hiked by Rs225 per quintal to Rs5,100 per quintal, which is 1.78 per cent higher than cost of cultivation. Major Rabi oilseed i.e., mustard seeds MSP is increased by Rs 225 per quintal to Rs4,650 per quintal, higher by 1.93 per cent of cost of cultivation. Major reason for sharp hike in MSP of oilseeds and pulses is to achieve self-sufficiency in production and reduce import dependency.
The highest increase in the MSP over of cost of production is for wheat whose MSP is increased by Rs50 per quintal to Rs1,975 per quintal, which is higher by 2.06 per cent of the cost of cultivation. Hike in the MSP rules out the concern of removal of MSP system and government procurement post introduction of two farm bills namely Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill-2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill-2020.
The trend in the MSP of various Rabi crop shows that the government has been constantly increasing MSP, which is 1.5 times cost of the cultivation. In the last seven years, the MSP for wheat is increased by Rs 525 per quintal; barley by Rs 450 per quintal; gram by Rs1,925 per quintal; masur by Rs2,025 per quintal; mustard seeds by Rs1,550 per quintal and safflower by Rs 2,277 per quintal.
The MSP mechanism is to protect the farmers from distress selling of their produce immediately after harvest and it also indicate minimum price the farmer is receiving upon harvesting of the crop. However, there are instance that market price fallen below MSP and that is purely because of excess supply in comparison with the demand.
The writer is head (commodity & currency research) at Karvy Comtrade Ltd