Govt announces formula for fixing MSP for paddy and wheat

Union Minister of Agriculture and Farmers Welfare Narendra Singh Tomar informed Rajya Sabha on Friday that government has fixed minimum support prices (MSPs) of 22 mandated crops including paddy, wheat for every agricultural year fair & remunerative price (FRP) for sugarcane on the basis of recommendations of Commission for Agricultural Costs & Prices (CACP).

National Commission on Farmers (NCF) headed by Dr MS Swaminathan had recommended that the MSP should be at least 50 per cent more than the weighted average cost of production.

This information was given in a written reply by the Union Minister in Rajya Sabha, and said that while recommending MSPs, CACP considers important factors like cost of production, overall demand-supply conditions, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors.

"The effect on the rest of the economy, besides ensuring rational utilization of land, water, and other production resources and a minimum of 50 per cent as the margin over the cost of production in case of MSPs and reasonable margins over the cost of production in case of FRP is also taken into account, " he added.

The Union Budget for 2018-19 had announced the pre-determined principle to keep MSP at levels of one and half times of the cost of production. Accordingly, Government has increased the MSPs for all mandated Kharif, Rabi and other commercial crops with a return of at least 50 per cent of the cost of production for the agricultural year 2018-19. During 2019-20 also, the Government has increased the MSP of all mandated Kharif and rabi crops in line with the principle of fixing the MSP with a return of at least 50 per cent of the cost of production.

However, when the National Policy for Farmers, 2007 was finalized by the then Government, this recommendation of providing 50 per cent returns over the cost of production was not included.