The minimum support prices (MSPs) for kharif 2024 crops declared by the government on June 19 are quite attractive for pulses and oilseeds. When food inflation is high, the Ministry of Finance tends to have more say than the Ministry of Agriculture and managing food inflation takes top priority. This pattern was visible in post-election years of 2014-15 and 2019-20. This year, despite high food inflation, a hike in MSP has followed a different pattern and attractive MSPs have been announced. This could well be attributed to the result of general elections (in rural dominated parliamentary seats) and impending assembly elections in Haryana and Maharashtra (October 2024).
| Percentage increase in MSP | |||
| 2014-15 over 2013-14 | 2019-20 over 2018-19 | 2024-25 over 2023-24 | |
| Paddy Common | 3.8 | 3.7 | 5.4 |
| Paddy Gr A | 4.1 | 3.7 | 5.3 |
| Jowar | 2.0 | 5.8 | 6.0 |
| Bajra | 0.0 | 2.6 | 5.0 |
| Maize | 0.0 | 3.5 | 6.5 |
| Tur | 1.2 | 2.2 | 7.9 |
| Moong | 2.2 | 1.1 | 1.4 |
| Urad | 1.2 | 1.8 | 6.5 |
| Cotton Medium Staple | 1.4 | 2.0 | 7.6 |
| Cotton Long Staple | 1.3 | 1.8 | 7.1 |
| Ground nut in shell | 0.0 | 4.1 | 6.4 |
| Sunflower Seed | 1.4 | 4.9 | 7.7 |
| Soybean yellow | 0.0 | 9.1 | 6.3 |
| Sesamum | 2.2 | 3.8 | 7.3 |
In the ten years from 2014-15 to 2023-24, the Modi government has given handsome hikes in the MSP of nutri-cereals, oilseeds and pulses. For pulses, this was a recommendation of the Subramanian Committee as well. The MSP for moong and tur was increased by 90.2% and 62.8% respectively. This year also, the government has announced a handsome increase of 7.9% for tur.
For paddy, the largest kharif crop, the hike looks a moderate 5.4% but it comes over handsome increases of 66.6% in the last ten years. In fact, last year in the run up to assembly elections in several states, the MSP of paddy was increased by 7%.
The farmers of Madhya Pradesh and Chhattisgarh will receive Rs 3,100 per quintal for paddy as in these two states, during the assembly elections in November 2023, the BJP had promised a bonus to top up the MSP. As a result, the paddy farmers of other major rice producing states like Punjab, Haryana, Uttar Pradesh, Bihar, West Bengal, Andhra Pradesh and Telangana will realise only Rs 2,300 per quintal. In the recently concluded assembly elections in Odisha, BJP had also promised a bonus of 42% (Rs 966 per quintal) over the MSP. So, the paddy farmers in Odisha will receive Rs 3,266 per quintal.
The government is already procuring too much rice in the central pool. Despite an erratic monsoon in 2023, rice production is estimated to be 136.7 million tonnes and the procurement is already 48 million tonnes (as on June 20). In fact, due to lower procurement of wheat in the last two years and even this year, the government has been giving rice in place of wheat even in wheat-eating states like UP. So, the ration card holders are getting three kg rice and two kg wheat per person per month.
Despite all the wishes of the Union government, production of rice in Punjab has not decreased and diversification from paddy remains distant. Paddy remains the most remunerative kharif crop as the gross return on other competing crops remain between 24% to 64% of return on paddy in the triennium ending 2022-23 (CACP Kharif report 2024-25). Cotton and ground nut are the only crops which gave higher return than paddy (110.2% and 105.6%, respectively).
The gross return on maize has gone up to 94.9% of return of paddy, but there is too much fluctuation in prices and procurement is not assured. Due to lower crop of sugarcane in 2023-24, ethanol production by reducing production of sugar has resulted in higher demand for maize. This is also helped by a more attractive price for ethanol from grains than ethanol produced from sugar cane. Despite this, it is unlikely that large paddy area in Punjab and Haryana will be diverted from paddy in current kharif.
Announcement of handsome increase in MSP does not guarantee higher production even though it is a strong incentive. For example, the MSP of chana was raised by 75.5% in the ten-year period to 2023-24. Its production went up from 7.33 million tonnes in 2014-15 to 13.5 million tonnes in 2021-22. But it has come down to 11.6 million tonnes in 2023-24. The reason is that the MSP of chana was not protected. Future trading was banned despite prices being below MSP. The net result is that India has now allowed duty free import of bengal gram and yellow pea.
Similarly, the MSP of mustard has not been protected and the prices of rabi crop of 2023-24 remained below MSP for several months. Solvent Extractor Association of India has been working with farmers to increase productivity and the effort has been quite successful in Rajasthan. Their model farms in Rajasthan, MP have achieved higher yields of up to 25-30 percent.
To sum up, attractive MSPs can incentivise specific crops, but the MSPs need to be protected by procurement and suitable and prompt adjustments of tariffs.
Siraj Hussain is former Union Agriculture Secretary.
