Union Cabinet Increases Farmers’ Support Prices and Allowances

Why in the news?

The Union Cabinet has approved a significant increase in minimum support prices for rabi crops and dearness allowance for government employees, aimed at mitigating inflation impacts ahead of Diwali and ensuring better earnings for farmers.

Union Cabinet Increases Farmers' Support Prices and Allowances

Minimum Support Prices (MSP) Increase:

  • The Union Cabinet has raised the MSP for various rabi crops ahead of Diwali.
  • The total cost for the MSP increase is estimated at ₹57,657 crore.
  • The increase aims to ensure farmers receive remunerative prices, balancing demand-supply and economic conditions.

Dearness Allowance and Relief for Government Employees:

  • The Cabinet approved an increase in dearness allowance for central government employees and pensioners.
  • The new allowance represents a 50% increase over the basic pay or pension, costing the exchequer an additional ₹9,448 crore annually.
  • Approximately 9 million employees and 65 million pensioners will benefit from this increase.

Railway Projects and Crop Specifics:

  • The Cabinet approved railway expansion projects in Varanasi and Chandauli districts, costing ₹2,612 crore.
  • MSP has been increased for six rabi crops: wheat, barley, gram, lentil, rapeseed, and safflower, with margins over production costs ranging from 50% to 105%.
  • Significant increases in MSP were noted for rapeseed and mustard, aimed at boosting domestic oilseed production and reducing reliance on imports.

What is Minimum Support Price (MSP)?

  • Definition:
  • MSP is the price at which the government buys crops from farmers to protect them against sharp price declines.
  • Announcement:
  • MSP is declared annually by the government based on recommendations from the Commission for Agricultural Costs and Prices (CACP) before the sowing season.
  • Background:
  • Origin:
  • Introduced in 1966, inspired by the Green Revolution.
  • Purpose:
  • Ensures farmers have a safety net against price fluctuations and maintains stability in agricultural markets for both Kharif and Rabi crops.

Committees on MSP:

  • Agricultural Prices Commission (APC):
    • Established in 1965, later renamed CACP, recommends MSPs for 23 crops (e.g., wheat, rice, pulses).
  • National Commission on Farmers (NCF):
    • Founded in 2004, recommended MSP should ensure a minimum 50% profit over production costs.
  • Shanta Kumar Committee:
    • Formed in 2014 to review FCI; suggested transitioning from price-based to income-based support for farmers.

Associated Article:

https://universalinstitutions.com/should-minimum-support-price-be-legalised/