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242 Economic Survey 2021-22

Figure 11: Trend in Fair & Remunerative Price (₹ /quintal)

Source: Based on data of CACP website.
Price Policy: Minimum Support Price (MSP)

7.17 The Government’s price policy for major agricultural commodities seeks to ensure
remunerative prices to the growers for their produce with a view to encourage higher investment
and production and thereby to safeguard the interest of consumers by making available supplies
at reasonable prices. The Government fixes MSP of 22 mandated agricultural crops on the basis
of the recommendations of Commission for Agricultural Costs & Prices (CACP) and after
due consideration of the views of State Governments and the concerned Central Ministries/
Departments. The 22 mandated crops include 14 Kharif crops viz. paddy, jowar, bajra, maize,
ragi, tur (arhar), moong, urad, groundnut, soybean (yellow), sunflower seed, sesamum, nigerseed,
cotton and 6 Rabi crops viz. wheat, barley, gram, masur (lentil), rapeseed and mustard, safflower
and 2 commercial crops viz. jute and copra. In addition to that, MSP for toria and de-husked
coconut are also fixed on the basis of MSPs of rapeseed & mustard and copra respectively.
7.18 While recommending MSPs, CACP considers important factors like cost of production,
overall demand-supply conditions, domestic and international prices, inter-crop price parity,
terms of trade between agricultural and non-agricultural sectors, the likely effect on the rest of
the economy, besides ensuring rational utilization of land, water and other production resources
and a minimum of 50 per cent as the margin over cost of production.

7.19 The Union Budget for 2018-19 had announced the pre-determined principle to keep
MSP at the level of one and half times of the cost of production. Accordingly, Government had
increased the MSP for all mandated Kharif, Rabi and other commercial crops with a return of at
least 50 per cent over all India weighted average cost of production from the agricultural year
2018-19 onwards.

7.20 In line with the same principle, Government has announced the increase in MSP for all
mandated kharif crops of year 2021-22. The highest absolute increase in MSP over the previous
year has been recommended for sesamum (₹ 452 per quintal) followed by tur and urad (₹ 300
per quintal each). In case of groundnut and nigerseed, there has been an increase of ₹ 275 per
quintal and ₹ 235 per quintal respectively in comparison to last year. The expected returns to
farmers over cost of production is estimated to be highest in case of bajra (85 per cent). For urad
and tur, return to farmers over cost of production is estimated at 65 per cent and 62 per cent
respectively. For the rest of the crops, return to farmers is estimated to be at least 50 per cent
(Figure 12).