Rabi crop MSP to be hiked for next season – (Rabi Crop MSP Hike)Approx Read Time: 3 minutes
In News: (Rabi Crop MSP Hike)
- The Cabinet Committee on Economic Affairs (CCEA) decided to increase to the minimum support price for winter crops for the forthcoming rabi marketing season (2020-21).
- The increase in MSP for rabi crops is in line with the principle of fixing MSPs at a level of at least 1.5 times of the all India weighted average cost of production.
- In the case of cereals, the Food Corporation of India and other designated State agencies would continue to provide price support to the farmers.
- State governments will undertake procurement of coarse grains with the prior approval of the Government and would distribute the entire procured quantity under National Food Security Act (NFSA).
- The highest increase has been recommended for lentils (increase of ₹325 to ₹4,800 a quintal) followed by safflower (increase of ₹270 to ₹5215 a quintal) and gram (an increase of ₹255 to ₹4875).
- For both wheat and barley, it has been increased by ₹85 to ₹1925 and ₹1525 per quintal, respectively.
- The MSP of rapeseed & mustard has been increased by ₹225 to ₹4,425.
- MSPs are one of the most important determinants of cropping patterns and overall production in India, as they signal the benchmark for farm prices across several commodities.
- The bigger increase in the MSP for pulses shows the Centre’s focus on encouraging farmers to grow protein-rich food grains, while discouraging cultivation of water and chemical fertilizers intensive crops like paddy and wheat.
Consumer’s point of view:
- Seen from the consumer’s point of view, a modest increase in MSPs would be a welcome sign. That is because, according to the latest data, retail food inflation in September jumped from 3% to 4.7%.
- Since food items account for over 54% of retail inflation, the headline inflation too shot up to a 14-month high.
- So, modest MSP increases suggest that food prices will perhaps not rise too high.
Farmer’s point of view:
- However, the farmer’s point of view is very different. Modest increases have been blamed for the stagnation in farm wages and an overall decline in rural demand.
- The most recent criticism on this count came from 2019 Economics Nobel winner Abhijit Banerjee, who pointed to low MSPs as a reason for depressed rural demand.
- Should the government have increased the MSPs by a bigger quantum to boost rural incomes and demand is an open question.
- Especially because doing so would entail the risk of heightened inflationary pressures, which can then force the RBI to reverse the cycle of cutting interest rates.