What is the news:

The Centre govt. has claimed that the switchover to the direct benefit transfer (DBT) of the MSP in Punjab was smooth due to the efforts of the government and its procurement agencies. A total DBT of Rs 49,965 crore are stated to be transferred directly into the accounts of farmers across the country for procurement of wheat this rabi marketing season, Rs 21,588 has gone to those in Punjab and about Rs 11,784 crore to Haryana.

According to the government data, as of May 9 Punjab procured 128.66 LMT and Haryana 80.76 LMT wheat. So far around 337.95 LMT has been procured, benefitting 34.07 lakh farmers against 28.15 lakh on the same date last year across the country.

What is MSP?

Minimum support price (MSP) is a “minimum price” for any crop that the government considers as remunerative for farmers and hence deserving of “support”. It is also the price that government agencies pay whenever they procure the particular crop.

The Centre currently fixes MSPs for 23 farm commodities — 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley), 5 pulses (chana, arhar/tur, urad, moong and masur), 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed) and 4 commercial crops (cotton, sugarcane, copra and raw jute).

The Central Government fixes the Minimum Support Price (MSP) on the recommendations of Commission for Agricultural Costs and Prices (CACP), which is also responsible for fixing the FRP (Fair and Remunerative Price) of sugarcane.
 

How is MSP Calculated?

The Swaminathan Committee prescribed three variables to determine the production cost. These three variables are:

A2: These are the out-of-pocket expenses incurred by farmers including loans for fertilisers, fuel, machinery, irrigation, etc. and cost of leasing land.

A2+FL: This is the estimated value of the unpaid labour for harvesting crops such as contribution of family members and others. It is in addition to paid-out cost.

C2: Comprehensive Cost (C2) is the actual cost of production as it takes into account for rent and interest foregone on the land and machinery owned by farmers, in addition to the A2+FL rate.

As per the Committee, the ideal formula to calculate the MSP would be:

MSP = C2+ 50% of C2