MSP Hike for Rabi Crops Strong Price Signals to Farmers

Based on the recommendations of CACP, the Centre has increased the MSP of six Rabi crops including for Pulses to curb price rise
MSP Hike for Rabi Crops Strong Price Signals to Farmers

In a bid to send a strong price signals to farmers to increase acreage and invest for increase in productivity of Rabi crops including pulses, the government has hiked the Minimum Support Prices (MSPs) for Rabi Crops of 2015-16 Season to be Marketed in 2016-17. The hike for pulses including bonus comes around 10.5 percent compared to last year.

The Cabinet Committee on Economic Affairs(CCEA), chaired by the Prime Minister Narendra Modi has given its approval for the MSP hike. The decision is based on recommendations of Commission for Agricultural Costs and Prices (CACP). CACP, which is an expert body, takes into account the cost of production, overall demand-supply, domestic and international prices, inter-crop price parity, terms of trade between agricultural and non-agricultural sectors, the likely effect of the Price Policy on the rest of economy, besides ensuring rational utilization of production resources like land and water, while recommending MSPs.

The MSP of six rabi crops — Wheat( 5.2 percent), Barley(6.5), Gram(7.9), Masoor(8.1), Rapeseed-Mustard ( 8.0) and Safflower( 8.2) — has been increased as recommended by the government’s advisory body Commission for Agriculture Costs and Prices (CACP).

“To boost production of pulses, the CCEA has hiked the support price of masoor dal and gram (chana) by Rs 250 a quintal each to Rs 3,325 a quintal and Rs 3,425 a quintal, respectively, for 2015-16,” Union Power Minister told reporters after the CCEA meeting.
RM on October 28, 2015 had reported that the Government mulls MSP hike upto Rs 300. (

“Over and above the CACP recommendation, the Union Cabinet decided to give additional bonus of Rs 75 per quintal in the case of gram and masoor. This will give some more relief to farmers,” he said.

New MSP is expected to give a strong price signal to farmers to increase acreage and invest for increase in productivity of pulses, Goyal said.

The prices would be effective from the Rabi marketing season 2016-17. The Minister feels that the higher MSPs would increase investment and production through assured remunerative prices to farmers.

However, Agri-experts differ from the government’s view on higher productivity of pulses with the new MSP. According to them Gram is currently trading in markets at Rs 4,800- 5,000 per quintal. Wholesale prices of Masur are similarly ruling at Rs 5,500-6,000 per quintal in major mandis. The MSPs that have been declared are way below the market prices to influence planting decisions of farmers.

The revised MSP should have happened before mid-October, as that is when farmers take a call on which crop to sow. The government attributed the delay to the Bihar Assembly elections. So, the decision has come late to have positive result on yield.

What the government desired ( higher productivity) for pulses, would be fulfilled through major Rabi crop, that is, Wheat and with Rs 75 higher MSP at 1,525 per quintal. Farmers would be more inclined to grow Wheat as this is more than the Rs 50/quintal annual increase in the last three years.

Ashok Gulati, former CACP Chairman said that the MSP increase in wheat will result in farmers producing more wheat, thereby worsening the problem of already overflowing government warehouses.

“We need to move away from fixing MSPs based purely on the supply curve. While farmers’ production costs have, no doubt, gone up, we need to also look at the demand side and encourage them to grow crops that the country really requires today,” he pointed out.

It is a paradox that the country requires around 21 million tonnes of Wheat but has 60 per cent more in stocks. There should be freeze on MSP hike. However, political implications always guide the government’s move.

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