Wheat MSP exceeds farmers’ ‘production cost plus 50%’ demand: Data

Wheat MSP exceeds farmers’ ‘production cost plus 50%’ demand: Data

IN AT LEAST two big states Punjab and Madhya Pradesh, farmers will receive a price higher than what they have been long demanding for wheat — i.e., C2 plus 50 per cent, where C2 is the cost of production and is equal to the “paid out cost plus imputed value of family labour plus rental value of owned land and interest on fixed capital”.

The two states together account for almost 35 per cent of India’s wheat production and contributed over 70 per cent to the total procurement done for the central pool in the rabi marketing season (2023-24).

Data compiled from the reports of the Commission for Agricultural Costs & Prices (CACP) — an expert body set up by the government that recommends Minimum Support Prices (MSP) for agriculture products based on input costs — shows that the MSP for wheat — Rs 2,275 per quintal — fixed by the Centre for Rabi Marketing Season 2024-25 is higher than C2 plus 50 per cent, as demanded by farmers.  The CACP, however, recommends the MSP based on the formula A2+FL, and the government eventually declares the same; here A2 includes only paid out costs incurred by the farmers. A2+FL is equal to “Paid out cost plus imputed value of family labour” and this is lower compared with C2.

In its report Price Policy for Rabi Crops: Marketing Season 2024-25—the CACP has pegged the C2 cost of production of wheat at Rs 1,503 per quintal for Punjab. Against this cost, farmers will receive the MSP of Rs 2,275 per quintal — resulting in a return of Rs 772 per quintal or 51.36 per cent. For paddy also, the return for Punjab farmers over the C2 cost was 49 per cent and 152 per cent over the A2+FL. As per CACP report, the projected A2+FL cost for paddy in Punjab during kharif marketing season 2023-24 was estimated at Rs 864 per quintal and the C2 cost at Rs 1,462 per quintal. When it is compared with the MSP of Rs 2,183 per quintal then, the return over the A2+FL comes 152.66 per cent and over C2 cost it comes 49.32 per cent. The all-India overall return over the C2 costs of production stood at 14.23 per cent for paddy and 34.92 per cent for wheat during the marketing season 2023-24.

One of the reasons for higher return in Punjab is due to higher yield. As per report, paddy yield in the state was projected at 69.84 quintal per hectare as compared to the country’s yield of 43.66 quintal per hectare. The projected wheat yield of Punjab was 49.98 quintal per hectare for RMS 2023-24, highest among all the states. Punjab accounts for 15 per cent of country’s total wheat production and ranks third after UP and Madhya Pradesh.

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