Lok Sabha Question No. 406 (UNSTARRED), answered on 2020-02-04
Subject: Calculation of Input Cost
Ministry: AGRICULTURE AND FARMERS WELFARE
Asked by: S.R. Parthiban

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

## LOK  SABHA UNSTARRED QUESTION NO.406

TO BE ANSWERED ON THE  4 TH  FEBRUARY, 2020

## CALCULATION OF INPUT COST

## 406.   SHRI PARTHIBAN S.R.:

Will the Minister of AGRICULTURE AND FARMERS WELFARE कृ ष एवं कसान कयाण मंी be pleased to state:

- (a) the criteria adopted for calculating the input cost in agriculture in the country;
- (b) the clause adopted for calculation of the MSP;
- (c) the details of MSP of various farm produce during the last year; and
- (d) whether it is in conformity with the MS Swaminathan Committee's recommendation for giving 1.5 times input cost to the farmers and if so, the details thereof?

## ANSWER

## MINISTER OF AGRICULTURE AND FARMERS WELFARE

कृ ष एवं कसान कयाण मंी ( SHRI NARENDRA SINGH TOMAR)

(a):        The Cost of cultivation is calculated following an elaborate methodology laid down in the scheme called 'Comprehensive Scheme for Studying Cost of Cultivation for Principal Crops in India'. The data is collected through 16 Cost of Cultivation Centres located in 16 Agricultural  Universities/General  Universities  and  Institutes.  Cost  data  is  collected  for  25 selected crops from 20 States. The crops covered are paddy, wheat, jowar, bajra, maize, ragi,  barley,  moong,  urad,  arhar,  gram,  masur,  groundnut,  rapeseed  and  mustard, nigerseed,  safflower,  soyabean,  sunflower,  sesamum,  cotton,  jute,  sugarcane,  onion, potato,  and coconut. These crops are selected for a block period of three years.

The  sampling  design  of  the  scheme  is  a  three  stage  stratified  random  sampling design with tehsil as the first stage unit, village/cluster of villages as the second-stage unit and operational holdings as the third and ultimate stage unit.

The  Scheme  envisages  collection  of  representative  data  on  inputs  and  outputs  in physical and monetary terms on a comparable and comprehensive basis following uniform methodology which is designed by an Expert Committee and is reviewed from time to time. The field data is collected based on the Cost Accounting Method by 16 Cost of Cultivation Centres  covering  20  states.  Under  the  scheme,  daily  entries  of  debit/credit  for  the expenditure/income are made in order to assess the total cost /benefit incurred/accrued to each farmer covered under the scheme.

The input cost estimates generated under CS Scheme include all paid-out cost, i.e.,  cost  incurred  in  cash  and  kind,  like  value  of  hired  human  labour,  hired  and  owned bullock  and  machine  labour,  value  of  seeds,  insecticides,  pesticides,  manure,  fertilizer, irrigation  charges,  land  revenue,  cesses  &  other  taxes,  interest  on  working  capital, miscellaneous expenses, rent paid for leased land; and imputed value of family labour.

Based on  the  crop-wise  and  state-wise  cost  estimates  generated  under  the  CS Scheme, CACP projects crop-wise all India weighted average cost of production for the ensuing  season  to  arrive  at  the  recommendations  of  Minimum  Support  Price  (MSP)  of major agriculture commodities.

(b) & (c):        The Government of India declares the MSPs of mandated agricultural crops, including kharif and rabi crops, based on the price policy recommendations of Commission for Agricultural Costs & Prices (CACP), after ascertaining the views of State Governments and Central Ministries/Departments concerned and other relevant factors. While recommending  MSPs for  crops,  CACP  keeps  in  mind  the  cost  of  production  and  other important factors, such  as  demand  and  supply  situation, trends in  domestic  and international  prices,  inter-crop  price  parity,  terms  of  trade  between  agricultural  and  nonagricultural 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 based on 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 & Statistics, Ministry of Agriculture and Farmers Welfare, CACP undertakes crop-wise, state-wise cost projection exercise for the ensuing season  under  certain  implicit  assumptions  by  utilizing  statistical  techniques.  These projected estimates of cost of production are factored into the formulation of price policy recommendations by the CACP. The detail of MSP of various agricultural crops during last year is given at Annexure I.

(d): National Commission on Farmers (NCF), headed by Dr. M.S. Swaminathan, has recommended that the MSP should be at least 50 percent more than the weighted average cost of production. However, when the National Policy for Farmers, 2007 was finalized by the  then  Government, this recommendation of providing 50 per cent return over cost of production was not included.

The Union Budget for 2018-19 had announced the pre-determined principle to keep MSPs at levels of one and half times of the cost of production. Accordingly, Government had increased the MSPs for all mandated Kharif, Rabi Crop and other commercial crops with a return of atleast 50 percent over the all-India weighted average cost of production for  the  season 2018-19. Government has recently increased the MSPs for all mandated Kharif and Rabi crops for 2019-20 season in line with the principle of providing atleast 50 percent return over all India  weighted average cost of production MSP, Cost and return over cost fixed for year 2018-19 and 2019-20 is given at Annexure II.

Cost of production varies in different States on account of difference in the yield of crops and owing to the levels of irrigation, resource endowment, farm mechanization, land holding size etc. As such, returns over cost of production may vary across States for MSP crops.

## Annexure I

Annexure I referred to in reply to part (b) & (c) of  Lok  Sabha  Unstarred Question No. 406 due for reply on 04.02.2020.

Minimum Support Prices (MSPs) of major agricultural crops during last year:

Rs. /quintal

| Sl. No.   | Commodity                          | Variety       | 2019-20   |
|-----------|------------------------------------|---------------|-----------|
|           | KHARIF CROPS                       |               |           |
| 1         | PADDY                              | Common        | 1815      |
|           |                                    | Grade A^      | 1835      |
| 2         | JOWAR                              | Hybrid        | 2550      |
|           |                                    | Maldandi^     | 2570      |
| 3         | BAJRA                              |               | 2000      |
| 4         | MAIZE                              |               | 1760      |
| 5         | RAGI                               |               | 3150      |
| 6         | ARHAR(Tur)                         |               | 5800      |
| 7         | MOONG                              |               | 7050      |
| 8         | URAD                               |               | 5700      |
| 9         | COTTON                             | Medium Staple | 5255      |
|           |                                    | Long Staple   | 5550      |
| 10        | GROUNDNUT IN SHELL                 |               | 5090      |
| 11        | SUNFLOWER SEED                     |               | 5650      |
| 12        | SOYABEEN                           |               | 3710      |
| 13        | SESAMUM                            |               | 6485      |
| 14        | NIGERSEED                          |               | 5940      |
|           | RABI CROPS                         |               |           |
| 15        | WHEAT                              |               | 1925      |
| 16        | BARLEY                             |               | 1525      |
| 17        | GRAM                               |               | 4875      |
| 18        | MASUR (LENTIL)                     |               | 4800      |
| 19        | RAPESEED/MUSTARD                   |               | 4425      |
| 20        | SAFFLOWER                          |               | 5215      |
| 21        | TORIA^                             |               | 4425      |
|           | OTHER CROPS                        |               |           |
| 22        | COPRA                              | Milling       | 9521      |
|           | (Calender Year)                    | Ball^         | 9920      |
| 23        | DE-HUSKED COCONUT^ (Calender Year) |               | 2571      |
| 24        | JUTE                               |               | 3950      |
| 25        | SUGARCANE                          |               | 275       |

## Annexure II

Annexure II referred to in reply to part (d) of Lok Sabha Unstarred Question No. 406 due for reply on 04.02.2020.

## Cost*, MSP and Return

(Rs per quintal)

|         | Commodity              | 2018-19   | 2018-19   | 2018-19           | 2019-20   | 2019-20   | 2019-20           |
|---------|------------------------|-----------|-----------|-------------------|-----------|-----------|-------------------|
| Sl. No. | KHARIF CROPS           | Cost*     | MSP       | %Return over Cost | Cost*     | MSP       | %Return over Cost |
| 1       | PADDY(Common)          | 1166      | 1750      | 50.1              | 1208      | 1815      | 50.2              |
|         | (Grade A)^             |           | 1770      |                   |           | 1835      |                   |
| 2       | JOWAR (Hybrid)         | 1619      | 2430      | 50.1              | 1698      | 2550      | 50.2              |
|         | (Maldandi) ^           |           | 2450      |                   |           | 2570      |                   |
| 3       | BAJRA                  | 990       | 1950      | 97.0              | 1083      | 2000      | 84.7              |
| 4       | MAIZE                  | 1131      | 1700      | 50.3              | 1171      | 1760      | 50.3              |
| 5       | RAGI                   | 1931      | 2897      | 50.0              | 2100      | 3150      | 50.0              |
| 6       | ARHAR(Tur)             | 3432      | 5675      | 65.4              | 3636      | 5800      | 59.5              |
| 7       | MOONG                  | 4650      | 6975      | 50.0              | 4699      | 7050      | 50.0              |
| 8       | URAD                   | 3438      | 5600      | 62.9              | 3477      | 5700      | 63.9              |
| 9       | COTTON (Medium Staple) | 3433      | 5150      | 50.0              | 3501      | 5255      | 50.1              |
|         | (Long Staple)^         |           | 5450      |                   |           | 5550      |                   |
| 10      | GROUNDNUT IN SHELL     | 3260      | 4890      | 50.0              | 3394      | 5090      | 50.0              |
| 11      | SUNFLOWER SEED         | 3592      | 5388      | 50.0              | 3767      | 5650      | 50.0              |
| 12      | SOYABEAN (Yellow)      | 2266      | 3399      | 50.0              | 2473      | 3710      | 50.0              |
| 13      | SESAMUM                | 4166      | 6249      | 50.0              | 4322      | 6485      | 50.0              |
| 14      | NIGERSEED              | 3918      | 5877      | 50.0              | 3960      | 5940      | 50.0              |
|         | RABI CROPS             |           |           |                   |           |           |                   |
| 1       | WHEAT                  | 866       | 1840      | 112.5             | 923       | 1925      | 108.6             |
| 2       | BARLEY                 | 860       | 1440      | 67.4              | 919       | 1525      | 65.9              |
| 3       | GRAM                   | 2637      | 4620      | 75.2              | 2801      | 4875      | 74.0              |
| 4       | MASUR (LENTIL)         | 2532      | 4475      | 76.7              | 2727      | 4800      | 76.0              |
| 5       | RAPESEED/MUSTARD       | 2212      | 4200      | 89.9              | 2323      | 4425      | 90.5              |
| 6       | SAFFLOWER              | 3294      | 4945      | 50.1              | 3470      | 5215      | 50.3              |
|         | OTHER CROPS            |           |           |                   |           |           |                   |
| 1       | COPRA (Milling)        | 5007      | 7511      | 50.0              | 6347      | 9521      | 50.0              |
|         | (Ball)^                |           | 7750      |                   |           | 9920      |                   |
| 2       | JUTE                   | 2267      | 3700      | 63.2              | 2535      | 3950      | 55.8              |
| 3       | SUGARCANE              | 155       | 275       | 77                | 156       | 275       | 76                |

*Includes  all  paid  out  costs  such  as  those  incurred  on  account  of  hired  human  labour,  bullock labour/machine labour, rent paid for leased in land, expenses incurred on use of material inputs like seeds, fertilizers, manures, irrigation charges, depreciation on implements and farm buildings, interest  on  working  capital,  diesel/electricity  for  operation  of  pump  sets  etc, miscellaneous expenses & imputed value of family labour.

^ Cost is not separately compiled for Paddy (Grade A), Jowar (Maldandi), Cotton (long staple) and Copra(ball).

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