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NEW DELHI : The central government on Monday announced minimum support prices (MSPs) of 14 kharif crops, planting for which will begin shortly with the progress of the annual monsoon.

MSPs of major rain-fed crops such as paddy, maize, arhar, moong, urad, groundnut, soybean and cotton for the 2020-21 marketing season were raised by a modest 2-5% compared to a year earlier.

This marginal increase is unlikely to cheer farmers who have been battered by a steep fall in prices of perishables in the past few months because of a coronavirus lockdown-induced fall in demand and repeated supply disruptions.

MSP is the price at which government agencies purchase crops from farmers. India’s kharif season starts with the onset of the monsoon in June and harvesting begins in October.

For rice, the main kharif crop, the Centre has fixed MSP at 1,868 per quintal, an increase of 53 over last year.

However, the 2.9% hike in rice MSP this year is lower than the 3.6% increase announced in 2019. It is also the lowest increase in the past five years.

In 2018, rice MSP was raised by a huge 12.9% year-on-year (y-o-y), ahead of the general elections held the following year.

Support price for maize was raised by 5.1% y-o-y to 1,850 per quintal. Among pulses, MSP of arhar or pigeon pea was fixed at 6,000 per quintal, an increase of 3.4%.

Similarly, MSPs of moong (green gram) and urad (black gram) were raised to 7,196 per quintal (an increase of 2.1%) and 6,000 per quintal (an increase of 5.3%), respectively.

Among major oilseeds, MSP of soybean was raised by 4.6% to 3,880 per quintal. MSP of long staple cotton was hiked by 5% to 5,825 per quintal.

The hike in MSP ensures that farmers will receive a price between 50% to 83% over their production costs, agriculture minister Narendra Singh Tomar said while announcing the decisions. The decision to fix MSP at 50% over production costs, which include all input costs plus a notional value of family labour, has been in place since 2018.

However, farmers’ rights groups have repeatedly pointed out that the cost matrix taken by the government does not include components such as the rental value of land and interest on value of owned capital assets.

This inflates the returns accrued to farmers compared to what they actually receive in cases where they can sell their produce at the support prices.

For instance, during 2019-20, at an MSP of 1,815 per quintal, paddy farmers got a return of 50.2% over the cost matrix used by the government (A2 plus FL), but the returns were significantly lower at 12% going by comprehensive costs (also known as C2).

The Union cabinet on Monday also approved an extension of the deadline by which farmers have to repay short-term crop loans. Usually farmers receive a 3% prompt repayment incentive if they repay their crop loans by March. This was extended to August because of the lockdown imposed to check the spread of the coronavirus, which has been in place since 25 March.

Following the announcements related to the agriculture sector, Prime Minister Narendra Modi said on Twitter that the central government has fulfilled its promise by fixing MSP at a level which is 1.5 times the cost of production. “Care has also been taken towards improving the financial situation of our farmers," the prime minister added.

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