The government on Wednesday hiked the minimum support prices (MSP) of the key kharif crops for 2023-24 season (July-June) by 6-10.4%, the highest increase since 2018-19. The MSP for paddy, the key kharif crop, is fixed at `2,183/quintal, up 7% on year.
The higher-than-expected MSPs will drive the gross value added (GVA) in “agriculture and allied services” in the second half of the current year, as procurement begins in October. Agri GVA grew a healthy 5.5% in Q4FY23.
Elevated MSPs, backed by procurement, could potentially boost rural income and purchasing power.
In 2018-19, the government adopted the policy of MSPs to ensure at least 50% profits over computed cost of production of crops. In that year, MSP hikes for kharif crops were in the range of 4.1-28.1%.
The MSP for moong for 2023-23 season will be `8,558/quintal, up 10.4%. Tur MSP will be up 6% on year at `7,000/quintal. The support price for groundnut and soybean, key oilseeds grown in kharif season have been increased by 9% and 7% on year to `6377/quintal and `4600/quintal, respectively.
Of course, the MSP purchases are more robust for paddy and wheat, than for other crops like oil seeds and pulses.
“The increase in the MSP would encourage farmers to expand area under pulses and oilseeds and could reduce the country’s dependence on the imports,” P K Joshi, former director (South Asia), International Food Policy Research Institute, said.
India imports about 56% of its total domestic requirement of edible oil while 15% of pulses consumption is met through imports.
The MSP for medium staple variety of cotton, a major cash crop grown in the kharif season, has been raised by 9% in 2023-24 season to `6,620/quintal. The MSP of other cereals such as maize, bajra, ragi and jowar has been hiked by 6.3-7.8% for the next sowing season.
“The expected margin to farmers over their cost of production is estimated to be highest in case of bajra (82%) followed by tur (58%), soybean (52%) and urad (51%). For rest of the crops, margin to farmers over their cost of production is estimated to be at least 50%,” according to an official note.
The cost of production for computation of MSP includes all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel and irrigation and an imputed value of unpaid family labour.
While the Food Corporation of India procures rice during October-September period from grain surplus states of Punjab, Haryana, Chhattisgarh, Odisha, Andhra Pradesh and Telangana for meeting public distribution system and buffer requirement, the farmer cooperative Nafed procures oilseeds and pulses when prices go below MSP. Nafed has to maintain a buffer of 2.2 million tonne (MT) of pulses as buffer stock.
India’s foodgrain production rose by 5% on year to a new record of 330.5 MT for the 2022-23 crop year, according to agriculture ministry.