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Apr 16, 20202 min read

States to Centre: Raise the MSP

COVID-19 and the ensuing lockdown will leave harvesting and sowing cycles as well as supply chains in disarray. Here’s why the Centre needs to listen to states who have demanded an increase in the Minimum Support Price. 





In 2018 the central government announced that it will offer Minimum Support Price (MSP) of cost + 50% to farmers. However, this is not adequate because the cost being used to calculate the MSP is lesser than the actual cost in many cases. 

The MSP for eligible crops is declared by the Commission for Agricultural Costs and Prices (CACP). The CACP has three different definitions of production costs – A2 (actual paid out cost), A2+FL (actual paid out cost plus imputed value of family labour) and C2 (comprehensive cost including imputed rent and interest on owned land and capital). As is evident, C2 > A2+FL > A2. The key recommendation of the Swaminathan commission was that MSP be set at 1.5 times C2, however as this report shows the price for no crop is being calculated using C2 as the base. 

In addition due to costs of production varying across states, a single MSP is unable to meet the needs of farmers.

States, including West Bengal, Haryana, Maharashtra, Chhattisgarh, Rajasthan, Uttar Pradesh, Tamil Nadu, Odisha, and Karnataka have all written to the central government to increase MSP but the centre has rejected their demands.  

The centre has also prohibited states from paying bonuses on their end to supplement the MSP. For eg. when Chhattisgarh sought to pay bonuses on paddy they were told that if they went ahead with the scheme the centre would stop procuring paddy from the state. 

At a time when the harvesting and sowing cycle as well as supply chains are bound to suffer disruptions the call to raise MSP assumes a renewed significance. 



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