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1.5 times formula for MSP
December 8 , 2020
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- The 1.5 times formula is used to determine the minimum support price (MSP) for crops.
- This was introduced during the Union Budget 2018-19.
- According to this formula, the MSP is fixed at 1.5 times the production cost for crops as a ‘pre-determined principle’.
- Under this formula, the Commission for Agricultural Costs & Prices only has to determine the production cost for a season and apply the formula.
- This Commission does not do any field-based cost estimates.
- Every year the Commission for Agricultural Costs and Prices operating under the Ministry of Agriculture will recommend minimum support prices for 23 crops.
- This includes 14 crops that are grown during the post monsoon or kharif season and six crops grown in winter or Rabi season.
- It also projects three other kinds of production cost for every crop.
- They are A2, C2 and A2+FL.
- A2 covers all the costs incurred by the farmer.
- This includes fertilizers, seeds, pesticides, higher labour, irrigation.
- The A2+FL includes all the cost incurred under A2 and the value of unpaid family labour.
- C2 is a comprehensive cost that includes rental, interest foregone on own land and fixed capital assets along with the A2+FL cost.
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