Hike In MSP

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  • The Central government has hiked the minimum support price (MSP) for common paddy, pulses, oilseeds and coarse cereals. 
  • The decision was taken by the Cabinet Committee on Economic Affairs recently.
  • The Central government has hiked the minimum support price (MSP) for common paddy to ₹1,940 a quintal for the coming kharif season, close to 4% higher than last year’s price of ₹1,868.
  • The announcement comes at a time when farm unions have been protesting for more than six months on Delhi’s outskirts, demanding legislation to guarantee MSP for all farmers for all crops, and a repeal of three contentious farm reform laws.


What is MSP? 

  • The MSP is the rate at which the government purchases crops from farmers, and is based on a calculation of at least one-and-a-half times the cost of production incurred by the farmers. The Union Budget for 2018-19 had announced that MSP would be kept at levels of 1.5 the cost of production.
  • The MSP is fixed twice a year on the recommendations of the Commission for Agricultural Costs and Prices (CACP), which is a statutory body and submits separate reports recommending prices for kharif and rabi seasons.

How is it recommended? 

  • The CACP considers both ‘A2+FL’ and ‘C2’ costs while recommending MSP. 
  • A2 costs cover all paid-out expenses, both in cash and kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel and irrigation, among others.
  • A2+FL covers actual paid-out costs plus an imputed value of unpaid family labour. 
  • The C2 costs account for the rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL.

Source : The Hindu

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