Government increases MSP of major Kharif crops

The government increased Minimum Support Price (MSPs) of primary kharif crops for the 2012-13 by up to 53 % that triggered concerns about further rise in food inflation.

Why this rise in MSP (as it will trigger concerns about further rise in food inflation)?

  • The raise was recommended by Commission for Agriculture Costs and Prices (CACP) after taking into account the cost of production.
  • “As per the CACP”:

a) High MSP of paddy would not affect the majority of the population, as after implementation of the Food Bill, 60% of the population would get grains at subsidized rates.

b) The government also has sufficient grain in its storage to control on any surge in rates.

c) As market rates are already higher the rise in MSPs would not lead lo increase in retail prices of oilseeds and a few pulses.

d) MSPs are already almost 50 per cent less than market prices.

  • Objective: The move is taken to incentivize the farmers and to encourage them to shift towards non-cereals crops, production of which is below the demand

The support prices of moong and tur, has not been raised due to stiff opposition from the Department of Consumer Affairs, which feared higher MSPs would lead to a increase in retail prices. The CACP had suggested raise of 29% and 25 %in the MSPs of Moong and Tur, respectively. Fearing surge in retail prices, a proposal providing an equity bonus of Rs 100 a quintal on paddy, over and above the MSP, was also rejected.

Are MSPs the primary reason behind allocating sown area for a crop?

  • No. MSPs were thought to be the primary reason behind allocating sown area for a crop, but according to Religare Commodities, the last few years had show barring soybean, cotton and paddy, farmers did not respond satisfactorily to a rise in MSPs.
Crop Previous MSP Current MSP Increase %
Change
(Rs per Quintal)
Paddy 1080 1250 170 15.74
Jowar 980 1500 520 53.06
Bajra 980 1175 195 19.90
Maize 980 1175 195 19.90
Ragi 1050 1500 450 42.86
Urad 3300 4300 1000 30.30
Groundnut 2700 3700 1000 37.04
Soyabean (b) 1650 2200 550 33.33
Sunflower Seed 2800 3700 900 32.14
Sesamum 3400 4200 800 23.53
Nigerseed 2900 3500 600 20.69
Cotton (MS) 2800 3600 800 28.57
Cotton (LS) 3300 3900 600 18.18

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