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Business News/ News / India/  MSPs, dearness allowance raised ahead of elections

MSPs, dearness allowance raised ahead of elections

Wheat and masoor saw the biggest increase in MSP at 7%, followed by barley (6.6%), mustard & rapeseed (3.6%), safflower (2.6%) and chana (2%)

The rabi season contributes almost half of India’s total foodgrain output (Photo: AFP)Premium
The rabi season contributes almost half of India’s total foodgrain output (Photo: AFP)

The Union cabinet approved a 2-7% increase in the minimum support price (MSP) of six rabi crops and raised inflation-linked pay for central employees and pensioners ahead of key assembly and general elections, where farmers and government employees are influential voting blocs.

The MSP increase for the 2024-25 rabi marketing season is in line with the government’s goal of doubling farmer incomes, information and broadcasting minister Anurag Thakur told reporters after the cabinet meeting on Wednesday.

On 17 September, Mint reported that the government could raise the minimum support price (MSP) of six rabi or winter crops, with increases ranging from 2% to 7%, for the 2024-25 marketing season. On Wednesday, the Centre increased wheat and masur prices by a maximum of 7%, followed by barley (6.6%), mustard and rapeseed (3.6%), safflower (2.6%) and chana (gram) (2%).

In absolute terms, the MSP for wheat rose to 2,275 from 2,125 a quintal and 6,425 per quintal from 6,000 for masur. The barley MSP has been hiked to 1,850 from 1,735 per quintal last season, and the chana MSP to 5,440 from 5,335 per quintal in the previous season. In the case of oilseed crops, the Centre hiked the MSP for rapeseed & mustard oilseed and safflower oilseed to 5,650 per quintal from 5,450 and 5,800 a quintal from 5,650 in 2023-24 (October-March) marketing season, respectively. The rabi season contributes to almost half of India’s total foodgrains output.

“A 2-7% MSP hike is reasonable. It may be slightly on the lower side, but then there has been a decline in some of the costs. Today’s MSP increase is fairly reasonable. This is unexpected because before elections, quite often, there are very large increases that are given, which makes farmers happy, but it can trigger inflation. Considering the current situation, when inflationary pressure is already there, I think this is a sensible decision," said Pronab Sen, former chief statistician of India.

MSP serves as a crucial safety net for farmers by guaranteeing them a minimum income regardless of market prices. It also helps ensure food security by encouraging farmers to cultivate certain crops, helping stabilize prices of staples such as wheat, rice and pulses. MSP changes for kharif and rabi crops are based on the recommendations of the Commission for Agricultural Costs and Prices. However, the government sets MSP in line with the Union Budget 2018-19 announcement of fixing MSP at a level of at least 1.5 times the all-India weighted average cost of production to ensure adequate compensation for farmers. This increased MSP for rabi crops will ensure remunerative prices to the farmers and incentivize crop diversification, Thakur said.

According to the agriculture ministry’s final advance estimates for 2022-23 released on Wednesday, India is estimated to have produced record-high foodgrains at 329.7 million tonnes, 14.1 million tonnes higher than the previous year.

In another decision aimed at benefitting a large number of central government employees, the cabinet approved increasing the dearness allowance (DA) and dearness relief (DR) to pensioners by 4% from 1 July 2023, taking the rate to 46% of the basic pay or pension, to compensate against price rise.

“This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission," the government said. The move will benefit about 4.87 million central government employees and 6.79 million pensioners and will cost the government 12,857 crore per year.

In a separate decision, the cabinet also approved the productivity-linked bonus (PLB) of 1,968.87 crore, equivalent to 78 days’ wages for FY23, to 1.1 million eligible non-gazetted railway employees. “Payment of PLB will act as an incentive to motivate the Railway employees to work towards further improvement in performance," an official statement said.

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Puja Das
Puja Das is a New Delhi based reporter, covering food, farm, fertiliser, water, and climate change policies for Mint. Puja reports on food security, farmers' distress and how the agriculture sector is impacting India's rural economy along with policy initiatives to help meet the pledges made at COP21 in Paris. Puja holds a post-graduation degree in Broadcast Journalism from the Indian Institute of Journalism & New Media, Bangalore.
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Published: 18 Oct 2023, 06:05 PM IST
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