Prime Minister Narendra Modi said on Friday that the much-awaited Minimum Support Price (MSP) of kharif crops for 2018-19 season, which would be 50 per cent more than cost, would be announced next week.
Addressing a group of sugarcane farmers in his residence, Modi also said that in the next two weeks, the Centre would also announce the Fair and Remunerative Price (FRP) for sugarcane for the sugar season of 2018-19.
This FRP will not only be higher than that of the 2017-18 season, but will also incentivise those farmers whose recovery from sugarcane will be in excess of 9.5 per cent.
The sugar season starts in October.
For the 2017-18 season, the Centre had fixed a sugarcane FRP of Rs 255 a quintal, which was Rs 25 more than the previous year's FRP.
Meanwhile, Modi also apprised over 140-odd sugarcane farmers who had come from Uttar Pradesh, Maharashtra, Karnataka, Uttarakhand and Punjab about the various steps the government has taken to ensure pending dues are cleared and their income is augmented. He said that in the past 7-10 days itself, around Rs 40 billion of sugarcane dues have been cleared due to the new policy measures announced by the government.
"I think it is a much-awaited decision (on MSP), and should be good for farmers. As far as the impact of high inflation on farmers is concerned, I don't think it would have any impact, because in wheat and rice, PDS operations act as a buffer against rising prices and also in other crops, too it won't push up wholesale prices," said P K Joshi, South-Asia Director of International Food Policy Research Institute (IFPRI).
He said studies conducted by IFPRI shows that in pulses and oilseeds, high MSPs haven't pushed up prices in the retail level.
"Inflation is more the work of rising incomes and dwindling supplies which isn't the case anymore atleast in case of supplies, therefore I don't think that food inflation would rise due to hike in MSP," Joshi said.
Though the MSP announcement is a routine exercise and has limited practical value for farmers except for those who grow wheat, rice and cotton to some extent, this time it has acquired added importance as the Budget 2018-19 had promised to mandatory fix it at 50 per cent over the cost of production for all the 23 notified crops.
What's more, the government has also promised to devise a foolproof mechanism in consultation with NITI Aayog to ensure that maximum procurement of crops takes place under MSP systems for crops other than wheat and rice.
Calculation of the cost for determining the MSP has been another contentious issue, with some farmers group wanting it to fixed at over comprehensive cost (C2).
However, the Centre by all accounts is expected to fix it at over A2+FL cost of production.
A2+FL broadly includes all input cost plus own and family labour while comprehensive cost (C2) includes all paid out expenses incurred, plus imputed value of unpaid family labour along with rentals and interest foregone on owned land and fixed capital.
MSP fixed on the basis of C2 cost is much higher than that fixed over A2+FL cost.
Modi, in his address to the sugarcane farmers, also assured them that the Centre has requested the state governments to take effective measures for liquidation of cane arrears.
He also exhorted farmers to use sprinkler and drip irrigation, the latest farming techniques, and solar pumps.
Modi also apprised farmers of his recent interaction with corporates, in which he called for greater private sector investment for value addition, warehousing, storage facilities, better quality seeds, and market linkages for improving farmers' income.