Government increases MSP of major Kharif crops

The government increased Minimum Support Price (MSPs) of primary kharif crops for the 2012-13 by up to 53 % that triggered concerns about further rise in food inflation.

Why this rise in MSP (as it will trigger concerns about further rise in food inflation)?

• The raise was recommended by Commission for Agriculture Costs and Prices (CACP) after taking into account the cost of production.
• “As per the CACP”:

a) High MSP of paddy would not affect the majority of the population, as after implementation of the Food Bill, 60% of the population would get grains at subsidized rates.

b) The government also has sufficient grain in its storage to control on any surge in rates.

c) As market rates are already higher the rise in MSPs would not lead lo increase in retail prices of oilseeds and a few pulses.

d) MSPs are already almost 50 per cent less than market prices.

• Objective: The move is taken to incentivize the farmers and to encourage them to shift towards non-cereals crops, production of which is below the demand

The support prices of moong and tur, has not been raised due to stiff opposition from the Department of Consumer Affairs, which feared higher MSPs would lead to a increase in retail prices. The CACP had suggested raise of 29% and 25 %in the MSPs of Moong and Tur, respectively. Fearing surge in retail prices, a proposal providing an equity bonus of Rs 100 a quintal on paddy, over and above the MSP, was also rejected.

Are MSPs the primary reason behind allocating sown area for a crop?

• No. MSPs were thought to be the primary reason behind allocating sown area for a crop, but according to Religare Commodities, the last few years had show barring soybean, cotton and paddy, farmers did not respond satisfactorily to a rise in MSPs.

Month: Current Affairs - June, 2012