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Modi Govt. Announces Budget for Crop Support Prices

This Wednesday, at a Cabinet meeting, the Modi government will be taking decisions on how to an amount of ₹15,000 crore to protect minimum support prices (MSP) at 150% of the input costs for crops including paddy, coarse grains and some pulses, according to a senior bureaucrat familiar with the development.

This decision will translate into the new MSP being 1.5 times of the input costs. The input costs consist of the prices incurred by farmers towards cultivation. This will be done so that farmers can get back 50% of their expenditure in returns. The decision to offer higher support prices for the Kharif season was first announced in the budget for 2018-19.

MSPs are announced twice a year, at the beginning of Rabi (winter) and Kharif (summer) sowing seasons. In the FY 2017-18, crop returns to farmers were below 50% of the costs of cultivation for most crops.

A key reason for the current distress is farmers’ failure to get MSP for even their produce. In Kharif 2017, net margins had gone negative for many crops. According to calculations by Ashok Gulati, the Infosys Chair Professor of Agriculture at ICRIER, during 2016-17 too, there were negative margins on Jowar (-18%), Sunflower (-13%), Groundnut (-4%), and Ragi (-20%) among others.

The government plans to spend up to ₹15,000 crore to ensure that something similar doesn’t occur this season.

On Saturday, PM Narendra Modi told a delegation of farmers that the government would ensure farmers get recommended MSP. He had also said that for the 2018-19 sugar season beginning October, the “fair and remunerative price” for sugarcane would be announced within the next two weeks. The 2018-19 cane price will be higher than the previous year’s price and also provide an incentive for those farmers whose recovery from sugarcane will be higher than 9.5%.