Lok Sabha Question No. 2266 (UNSTARRED), answered on 2018-07-31
Subject: Review of formula for computing MSP
Ministry: AGRICULTURE AND FARMERS WELFARE
Asked by: MOHANBHAI KALYANJIBHAI KUNDARIYA

## GOVERNMENT OF INDIA

## MINISTRY OF AGRICULTURE AND FARMERS WELFARE DEPARTMENT OF AGRICULTURE, COOPERATION AND FARMERS WELFARE

## LOK  SABHA UNSTARRED QUESTION NO.2266

TO BE ANSWERED ON THE  31 ST  JULY, 2018

## REVIEW OF FORMULA FOR COMPUTING MSP

2266.  SHRI KUNDARIYA MOHAN BHAI KALYANJI BHAI:

Will  the  Minister  of  AGRICULTURE AND FARMERS WELFARE   ‡ãðŠãäÓã ½ãâ¨ããè be pleased to state:

एवं किसान िल्याण

- (a) whether  the  Government  proposes  to  review  the  formula  for  computing  MSP  for Kharif crops;
- (b) if  so,  the  details  thereof  indicating  the  present  formula  and  the  changes  proposed therein;
- (c) whether the proposed formula is similar to the Rabi MSP formula and if so, the details thereof;
- (d) the benefits to be accrued to the farmers and the Government along with the manner in which it is proposed to be implemented; and
- (e) the manner in which the Government proposes to raise additional funds to meet the rising procurement costs?

## ANSWER

MINISTER OF  STATE IN THE  MINISTRY OF  AGRICULTURE AND  FARMERS  WELFARE

‡ãðŠãäÓã एवं किसान िल्याण ½ãâ¨ããÊã¾ã ½ãñâ Àã·¾ã ½ãâ¨ããè ( SHRI GAJENDRA SINGH SHEKHAWAT)

- (a) to (c): Government fixes  MSPs of  22 mandated kharif and  rabi  crops  and fair  and remunerative price (FRP) for sugarcane on the basis of recommendations of Commission for Agricultural Costs and Prices (CACP), after considering the views of State Governments and Central Ministries/Departments concerned and other relevant factors.

While recommending MSPs for all mandated crops of both Rabi and Kharif seasons, CACP  considers  cost  of  production  and  other  important  factors  such  as  demand-supply situation, trends in domestic and international prices, inter-crop price parity, terms of trade between  agricultural and  non-agricultural sectors and  the  likely  impact  of  MSP  on consumers and overall economy along with rational utilization of scarce natural resources like  land  and  water.  The  methodology  adopted  by  CACP  is  on  the  basis  of  the recommendations of different expert committees on the 'methodology of cost of production'. Based  on  the  latest  three  years  actual  cost  estimates  provided  by  the  Directorate  of Economics and Statistics,  Ministry  of  Agriculture  and  Farmers Welfare  which  is  compiled under 'Comprehensive Scheme for studying the Costs of Cultivation of Principal Crops in India',  CACP  undertakes  cost  projection  exercise  crop-wise,  state-wise  for  the  ensuing season under certain implicit assumptions by utilizing statistical techniques.

(d): Government fixes MSP which acts as a floor price as this is backed up by schemes for  procuring  the  crops.  Cereals  like  Paddy  and  Wheat  are  procured  by  FCI  and  other designated agencies including by the States under the decentralized procurement system mainly for distribution under the public distribution system (PDS), which takes care of the basic consumption needs of the poor. However, if farmers get better price in comparison to MSP, they are free to sell their produce in open market.

In  addition  to  above  mentioned  scheme,  the  Government  has  taken  several  other steps  to  ensure  remunerative  prices  to  farmers  for  their  produce  including  price  support scheme (PSS) for pulses, oilseeds and cotton. Under PSS, payments to the farmers are made  strictly  through  Real  Time  Gross  Settlement  (RTGS)/National  Electronic  Fund Transfer (NEFT) and account payee cheque by the procuring agencies within three days of purchase of their produce.

(e): The difference between the economic cost of the cereals procured and their central issue  prices  under  PDS  is  the  subsidy  outgo  which  is  borne  on  the  Budget.  Government provides guarantee based on which the procurement agencies conduct their operations for pulses, oilseeds and cotton under PSS and also for copra and jute. The losses incurred by procurement agencies in the process are borne on the Budget.

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