Government may increase the MSP of summer crops by 5 to 20 percent

The government may announce a higher-than-normal increase in the Minimum Support Price (MSP) for summer-sown crops in the year 2022-23, keeping in mind the sharp rise in the cost of agricultural inputs.

The increase in MSP this year could be roughly in the range of 5-20%, the highest since 2018-19 when MSP 4.1 for Kharif crops due to a new policy of 50% return on the calculated cost of production increased in the range of -28.1. ,

In the last three years, the MSP growth was broadly in the range of 1-5%.

According to sources, for oilseeds like soybean and groundnut, the Commission for Agricultural Costs and Prices has recommended the fastest hike in MSP this year. Among pulses, tur and moong may also see a steep hike in support prices, as imports of these items increased last year amid domestic supply crunch. The government also believes that higher domestic production of other oilseeds will help reduce palm oil imports.

While increases in MSP supported by procurement could potentially boost rural incomes and purchasing power, these could further add to inflationary pressures. Wholesale inflation rose to 15.08% in April, the highest in at least 17 years.

Food inflation came in above overall retail price inflation for April and May, 2022. It was 8.1% in April, while CPI inflation stood at 7.79%.

The cost of production for MSP will include all costs paid directly by the farmer – in cash and kind – on seeds, fertilisers, pesticides, hired labour, leased land, fuel and irrigation and an imputed value of the unpaid family . Labor.

“The increase in the MSP of commodities like oilseeds, pulses and nutritive cereals (jowar, bajra and ragi) and cotton is expected to be higher than that of paddy,” said a source, adding that the idea is to encourage farmers to reduce water cultivation. does. Intensive crops and support crop diversification.

An official said, “Our focus is to realign the MSP in favor of oilseeds, pulses and coarse cereals to encourage farmers to shift to these crops, which are environmentally sustainable and thus reduce the country’s dependence on imports.

India imports about 55-56% of its total domestic requirement of edible oil while 15% of its pulses consumption is met through imports.

In a race to top the rising food inflation, the government recently allowed tariff-free imports of crude soybean and sunflower oils during this financial year and the next. Tax exemption is also subject to an annual limit of 2 million tonnes each, which would be more than enough to meet the needs of domestic refiners and ease supply in the domestic market.

The exemption of basic customs duty for the two edible oils, which together account for a quarter of India’s edible oil imports, was extended till the end of FY24, and the remaining 5% Agriculture Infrastructure Development Cess on the two crude edible oils. was removed.

As on July 1, the Food Corporation of India is expected to have a rice stock of around 29 to 30 million tonnes (MT) excluding about 17 MT of food grains receivable from millers against the buffer norm of 13.5 MT.

Ashok Gulati, former chairman of the commission said, “With the cost of production rising in the last one year, the hike in MSP for kharif crops should be enough so that the government can fulfill its commitment to provide farmers 50% more than the cost of production. ” Agricultural Costs and Prices and Chair Professor (Agriculture), India Council for Research in International Economic Relations told FE.

A large increase has been observed in the prices of agricultural inputs such as electricity, transporters and pesticides. Although the prices of fertilizers and key fertilizer inputs have also increased in the global market, a sharp increase in subsidies by the government will free farmers to a large extent from cost escalation.

The government’s food subsidy expenditure for 2022-23 is expected to increase further from the budget of Rs 2.06 trillion.

The government has decided to absorb a major part of the increase in fertilizer prices and the subsidy is expected to reach Rs 2.15 trillion in 2022-23 as against Rs 1.62 trillion in 2021-22, mainly from phosphatic and potassic ( P&K) due to increase in global prices. Fertilizers and Urea in the last one year.

PK Joshi, former director (South Asia), International Food Policy Research Institute, said, “The emphasis of the MSP regime should be on increasing oilseeds and pulses production so as to reduce dependence on imports and boost farmers’ income.”

To meet the Public Distribution System (PDS) requirement, FCI procures rice from the grain surplus states of Punjab, Haryana, Chhattisgarh, Odisha, Andhra Pradesh and Telangana during the October-September period, while the farmers’ cooperative Nafed oilseeds and pulses. When the prices fall below the MSP. Nafed is to maintain a buffer of 2.2 MT of pulses as buffer stock.