MSP: MSP hikes marginally amid inflation concerns

The government on Wednesday announced a 5-9% increase in the minimum support price (MSP) for summer sown crops in the 2022-23 season. These rates, the highest since 2018-19, were still lower than expected, due to a large increase in the prices of various agricultural inputs – from seeds and fertilizers to electricity and transport.

The Cabinet Committee on Economic Affairs (CCEA), which approved the recommendations of the Committee on Agricultural Costs and Prices, struck a balance between the twin objectives of providing income support to farmers and curbing runaway food inflation.

The Monetary Policy Committee (MPC), held in Mumbai over the past three days, noted that “continuous shocks to food inflation may keep pressure on headline inflation”.

The sharpest increase in the declared MSP was for soybean (yellow) at 9%, while the MSP of paddy was raised by 5% to Rs 2,040 per quintal.

Food inflation came in above overall retail price inflation for April and May 2022. It stood at 8.1% in April, while the overall consumer price index-based inflation stood at 7.79%. Among various agricultural commodities, the retail prices of wheat, edible oil and tomato have seen the sharpest increase in the last one year.

The MSP for Kharif crops increased by 4-28% in 2018-19 due to the policy of 50% return on the calculated cost of production. Since then, the policy has been followed, but increases have been moderate.

Union Information and Broadcasting Minister Anurag Thakur said that the new MSPs of Bajra, Arhar, Urad, Sunflower Seed, Soyabean and Groundnut exceed the cost of production by 85%, 60%, 59%, 56%, 53% and 51% respectively.

Sowing of Kharif crops like paddy, pulses, oilseeds and coarse cereals has just started.

“The increase in the current year’s MSP is much higher than the previous year. The balance between ensuring a fair price to the farmer and keeping an eye on inflation has been a challenge,” said Madan Sabnavis, Chief Economist Bank Of BarodaTold.

The MSP for oilseeds like groundnut, sunflower and sesame has been increased by 5.4%, 6.4% and 7.2% over the previous year to Rs 5,850, Rs 6,400 and Rs 7,830 per quintal, respectively. The MSP of cotton (medium staple) has been increased by 6.2% to Rs 6,080 per quintal.

In case of pulses, MSP for tur, moong and urad has been increased by 4.8%, 6.6% and 4.8% from last year to Rs 6,600, Rs 7,755 and Rs 6,600 per quintal, respectively.

“In the last few years, concerted efforts have been made to re-establish the MSP in favor of oilseeds, pulses and coarse cereals so that farmers can shift to larger areas under these crops and address the demand and supply imbalances,” an official said. to be encouraged to do so.”

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

While increases in MSP supported by procurement could potentially boost rural incomes and purchasing power, these could further add to inflationary pressures.

“Given the inflationary pressures in the economy, the increase in MSP has been moderated to some extent. Moreover, most of the increased cost due to fertilizers is absorbed by the government through increase in fertilizer subsidy,” said Ashok Gulati, former chairman, Commission for Agricultural Costs and Prices and chairman professor (agriculture), India Council for Research in International Economic Relations, reported. FE.

The government has decided to absorb a major portion 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 potassium ( P&K) due to increase in global prices. ) Fertilizers and Urea in the last one year.