Budget 2018: What cost will Finance Ministry Arun Jaitley use for MSP?

Published: February 2, 2018 6:00 AM

Budget 2018: The MSP for wheat is currently fixed at Rs 1,735/quintal — this is 112.36% higher than the A2 + FL cost of production (Rs 817/quintal), but only 13.77% higher than the C2 cost (Rs 1,525/quintal). 

Budget 2018: In his Budget speech, finance minister Arun Jaitley announced that the minimum support price (MSP) will be raised by 1.5X over the cost of production for rabi crops.Budget 2018: In his Budget speech, finance minister Arun Jaitley announced that the minimum support price (MSP) will be raised by 1.5X over the cost of production for rabi crops.

Budget 2018: In his Budget speech, finance minister Arun Jaitley announced that the minimum support price (MSP) will be raised by 1.5X over the cost of production for rabi crops. However, the cost in his calculations is what the Commission for Agricultural Costs and Prices (CACP) has arrived at, not the C2 cost — which includes, among other things, imputed rent on land and interest on capital —that farmers had been demanding. Jaitley also said, “The government has decided to keep MSP for the all unannounced crops of kharif at least at one and half times of their production cost.” The CACP’s recommendations of the MSPs are based on the A2+FL —actual paid-out cost plus imputed value of family labour in the production of a crop. The Swaminathan commission had recommended that the MSP for a particular crop should be 50% more than its C2 cost.

Also Watch | Budget 2018: How it affects auto sector, car prices & motorists

The MSP for wheat is currently fixed at Rs 1,735/quintal — this is 112.36% higher than the A2 + FL cost of production (Rs 817/quintal), but only 13.77% higher than the C2 cost (Rs 1,525/quintal). Amongst rabi crops, the MSP fixed for barley is higher than the A2 + FL cost by 66.86%. For gram, it is higher by 78.8%, for masur, by 79.6%, and for mustard, by 88.4%. NITI Aayog member Ramesh Chand, however, said that the cost of production cannot be calculated on the basis of costs which the farmer does not incur. Jaitley said that the decision would “prove an important step towards doubling the income” of farmers. “NITI Aayog, in consultation with Central and State governments, will put in place a fool-proof mechanism so that farmers will get adequate price for their produce,” he said. VM Singh, convener of All India Kisan Sangharsh Coordination Committee (AIKSCC), remarked that farmers are disappointed as they had expected that this being the last budget, the government would announce deeper sops for farmers.

Income tax impact of Budget 2018. Calculate gain or loss with this Income Tax Calculator

The finance minister also announced the launch of Gramin Agricultural Markets (GrAMs), under which 22,000 rural haats, exempt from mandi regulations under the APMC Act, will be upgraded or developed. He allocated a corpus of Rs 2,000 crore to set up marketing infrastructure for these GrAMs, which will also be linked with e-NAM.

Prabhudatta Mishra

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition