Prime Minister Narendra Modi on Friday announced that the Union Cabinet will approve the implementation of Minimum Support Price (MSP) of 150 per cent of the input cost in its forthcoming meeting, for the notified crops of Kharif season 2018-19. This would ensure a significant boost to the income of farmers. 

The Prime Minister announced this during interaction with 140 sugarcane farmers from Uttar Pradesh, Uttarakhand, Punjab, Maharashtra and Karnataka at lok Kalyan Marg.

The Modi Government has promised to double farm incomes by 2022. In his February Budget, he pledged to boost farmers’ returns by increasing the Government’s purchase prices for crops by more than 50 per cent of the output cost.

Faced with a distressed rural class, the Modi Government is out to woo farmers ahead of his re-election bid next year by promising to boost their incomes, including raising the prices of crops, at which they sell to the Government. This was Modi’s second meeting with farmers in the last ten days as his Government seeks to address farm sector woes in the election year and has also made slew of announcements, including Rs 8,500 crore package for sugar sector.

After consulting with State Governments and NITI Aayog, the Agriculture Ministry has opted three concepts for implementing the MSP which include Market Assurance Scheme (MAS), Madhya Pradesh’s Bhawaawantar Bhugtaan Yojana (BBY) or Price Deficiency Procurement Scheme and procurement by private players. “The Prime Minister announced that the Union Cabinet would approve the implementation of Minimum Support Price (MSP) of 150 per cent of the input cost, in its forthcoming meeting, for the notified crops of Kharif season 2018-19,” a PMO statement said.

The Union Cabinet will decide which concept would be better to put in place a “fool-proof mechanism” for implementing the MSP. 

The market assurance scheme allows for 100 per cent compensation from the Centre to the States if the loss in procurement and other operations is 25 per cent of the MSP of a crop. The Centre will provide 60 per cent compensation if the loss is 25-30 per cent, and if the loss is 30 to 40 per cent, it will be shared equally between the Centre and the States.

The second concept is Madhya Pradesh’s Bhawaawantar Bhugtaan Yojana (BBY) or Price Deficiency Procurement Scheme. Under this scheme, if the sale price is below a modal price then the farmers are compensated to the difference between MSP and actual price subject to a ceiling which may not exceed 25 per cent of the MSP. No compensation is due if modal price in neighbouring States is above the MSP.

The third concept is procurement by private entrepreneurs at MSP and the Government provides some sort of policy and tax incentives and a commission to such private entities which may be decided on the basis of transparent criteria. The private player is nominated through a transparent bidding process by the state government. In India, MSP for 24 agricultural commodities of Kharif and Rabi season are announced by the Government based on the recommendations of the Commission for Agriculture Cost and Prices.

During interaction with farmers, the Prime Minister also stated that within the next two weeks, the Fair and Remunerative Price (FRP) for sugarcane for the sugar season of 2018-19, will also be announced.

He said that this will also be higher than the 2017-18 price. It will also provide incentive for those farmers whose recovery from sugarcane will be higher than 9.5 per cent.