Seed Sector and MSP

Seed Sector

The percentage of the total cropped area that was planted

with certified seeds as opposed to farm-saved seeds is known as the Seed Replacement Ratio, or Seed Replacement Rate (SSR). Crop to crop, this ratio ranges from 7% for staple crops to a maximum of 70% for some fruits and vegetables. For rice and wheat, it ranges from 9 to 18%. The seed industry faces multifaceted pressures. Climate variability disrupts production cycles, impacting yields and resilience. Resource scarcity (water, land) strains the industry’s ability to meet rising demand for quality seeds. Complex regulations delay new variety releases, hindering innovation. Balancing intellectual property protection with open innovation remains a challenge. Finally, evolving consumer preferences for nutrition, taste and sustainability necessitate ongoing seed variety adaptation.

Major Reforms undertaken in Seed Sector

Sub-Mission on Seeds & Planting Materials: To produce and supply quality seeds to farmers to enhance production and productivity in the country through Seed Village Programme, Establishment of Seed Processing- cum- Seed Storage Godowns at Gram Panchyat Level, National Seed Reserve, Boosting Seed Production in Private Sector and Strengthening of Quality Control Infrastructure Facilities.

Plant Genome Saviour Community Awards to farmers: by the Protection of Plant Varieties and Farmers’ Right Authority from the National Gene Fund.

Seeds Act 1966: Along with the Seed Regulation Order of 1983, form the legal framework for ensuring the quality of seeds available to Indian farmers and sets up advisory bodies, seed certification agencies, seed testing facilities, foreign seed certification agencies’ recognition, appellate authorities, etc.

Minimum Support Price

In the interest of food security the Union Government annually sets the Minimum Support Price (MSP) for key agricultural products. The MSP acts as a crucial tool, assuring farmers of a predetermined fair price before the sowing season, fostering increased investment and production in agricultural commodities.

Features of MSP

• Minimum Support Price (MSP) is the price at which the government procures crops directly from farmers.

• The government declares minimum support prices (MSPs) for 22 specified crops and fair and remunerative price (FRP) for sugarcane.

• The Crops covered includes

• 14 Kharif crops: Arhar , Bajra , Groundnut- in - Shell, Jowar , Maize , Moong , Niger seed ,Paddy , Ragi , Soyabean, Sunflower, Sesamum, Urad and Cotton

• 6 Rabi crops: Wheat , Barley , Gram , Rapeseed& Mustard , Masur , Safflower

• 3 Commercial crops: Jute , Copra, Sugarcane

• Moreover, the minimum support prices (MSPs) for toria and de-husked coconut are determined based on the MSPs established for rapeseed/mustard and copra, respectively.

• Alternative way of classification of Crops covered under MSP

• Cereals (7): paddy, wheat, barley, jowar, bajra, maize and ragi

• Pulses (5): gram, arhar/tur, moong, urad and lentil

• Oilseeds (8): groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed

• Others: Raw cotton, Raw jute, Copra, De-husked coconut, Sugarcane (Fair and remunerative price)

• Determining MSP: MSP is established based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, approves and announces the final MSP decision.

• CACP formulates MSP recommendations for 23 crops, considering factors like cultivation costs, supply and demand dynamics, and market trends , parity vis-à-vis other crops etc

• The current formula employed by the government for calculating the cost of production= (A2+ FL ) x

1.5 times. It was recommended by MS Swaminathan Commission.

• A2 encompasses the actual costs incurred by farmers on seeds, fertilizers, pesticides, hired labor, depreciation on machinery, interest on working capital etc

• FL represents the imputed value of unpaid family labor.

• The Swaminathan Committee had also recommen- ded the C2 method for calculating the cost of production, but the government has not adopted it. The C2 formula would include various costs such as imputed rent on owned land, imputed interest on farmers’ capital, etc., in addition to the A2 + FL formula.

Need of MSP

• Lifting Farmers from Low-Income Traps:

• Assured Value and Market Stability: By guaranteeing fixed prices, MSP provides farmers with a reliable income, shielding them from the unpredictable nature of market price fluctuations.

• Informed Decision-Making: Announced pre-sowing season, MSP empowers farmers to make informed choices about crop selection, optimizing economic benefits and minimizing risks.

• Benchmark for Private Sector: MSP sets a benchmark, guiding private players in the agricultural sector,

fostering stability, and ensuring fair competition aligned with government-set price standards.

• Encouraging Investment: Farmers, assured of a minimum price, are motivated to invest more in cultivation.

• Ensuring Supply: The fixed MSP encourages consistent crop production, averting shortages in subsequent years.

• Consumer Benefit: Stable prices benefit consumers, ensuring a reliable and affordable supply of agricultural goods.

Issues with MSP

• Low Awareness: Only 6% of Indian farmers benefit from MSP, as per the Shanta Kumar Committee.

• Non-remunerative Price: In many states, farmers struggle to cover cultivation costs through MSP.

• Distorted Procurement Focus:

• The concentrated MSP procurement on select crops like wheat, rice and sugarcane has contributed to an imbalanced agricultural landscape, sidelining the cultivation of essential crops such as pulses, oilseeds, and coarse grains.

• This distortion not only fuels inflation but also intensifies the strain on water resources.

• Regional imbalance: Inadequate procurement infrastructure in eastern states contributes to regional imbalances.

• Economic Impact: MSP poses a significant strain on fiscal resources.

• Exclusion of Vegetables and Fruits: MSP is not announced for essential commodities like vegetables and fruits.

Way Forward

• Increasing Awareness: Utilize new media channels for disseminating MSP information.

• Early MSP Announcement: Announce MSP well in advance of the sowing season for effective farmer planning.

• Crop Diversification: Implement MSP for other crops to encourage diversification. (coarse cereals, pulses, oilseeds etc.)

• Decentralized Procurement: Establish decentralized procurement to reduce transportation costs for farmers in remote areas.

• Warehouses/Silos: Expand storage facilities to minimize wastage.

• MSP for Vegetables and Fruits: Extend MSP to include vegetables and fruits for comprehensive farmer support.

Fair and Remunerative Price

According to the Sugarcane (Control) Order, 1966, which was issued under the Essential Commodities Act (ECA),

1955, sugarcane’s “FRP” is established. It is the minimum price that sugar mills must pay farmers for sugarcane. The Commission for Agricultural Costs and Prices (CACP) makes recommendations, which the Cabinet Committee on Economic Affairs (CCEA) then fixes after consulting with state governments and gathering input from associations in the sugar industry.

Determination of FRP

• In order to ensure that higher sugar recoveries are adequately rewarded and considering variations amongst sugar mills, the FRP is linked to a basic recovery rate of sugar, with a premium payable to farmers for higher recoveries of sugar from sugarcane. It considers the following:-

• cost of production,

• demand-supply situation,

• return to the growers from alternative crops and the general trend of prices.

• domestic & international prices,

• recovery of sugar from sugarcane;

• inter-crop price parity etc.

• Under the FRP system, the farmers are not required to wait till the end of the season or for any announcement of the profits by sugar mills or the Government. The new system also assures margins on account of profit and risk to farmers, irrespective of the fact whether sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill.

• Additionally, each state releases a price known as the State Advisory Price (SAP), which is typically higher than the sugarcane Statutory Minimum Price (SMP).

Why has the FRP increased over time?

• Growth of ethanol as a biofuel sector in the last 5 years has amply supported the sugarcane farmers and sugar sector, as diversion of sugarcane/sugar to ethanol has led to better financial positions of sugar mills.

• The Ethanol Blended with Petrol (EBP) Programme has saved foreign exchange as well as strengthened energy security of the country and has reduced dependence on imported fossil fuel.

• By 2025, it is targeted to divert more than 60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar and will also generate employment opportunities in rural areas.

• India is now playing a crucial role in the global sugar economy as it is the second largest exporter of sugar in the world.

• In the sugar season 2021-22, India has also become the largest producer of sugar.

• It is expected that India would become the third largest ethanol producing country in the world by 2025-26.

Agriculture Export Policy 2018

India is a leading global producer of cereals, milk, sugar, fruits & vegetables, spices, eggs and seafood. India supports a large population (17.84%) and livestock (15%) with limited land (2.4%) and water (4%) resources. Agriculture employs nearly 50% of India’s population. However, studies indicate significant losses (8-18%) in fruits, vegetables, and fisheries due to poor post-harvest practices, lack of cold chain facilities, and limited processing capabilities. This is why the Export Policy 2018 was introduced with a focus on export-oriented production, export promotion, better farmer realization and synchronization within policies.

Objectives

• To achieve a stable trade policy regime and double agricultural exports from the current level of approximately US$ 30 billion to US$ 60 billion by 2022, with a target of US$ 100 billion in the following years.

• To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables.

• To promote novel, indigenous, organic, ethnic, traditional and non traditional Agri products exports.

• To provide an institutional mechanism for pursuing market access, tackling barriers and dealing with sanitary and phytosanitary issues.

• To strive to double India’s share in world agri exports by integrating with the global value chain at the earliest.

• Give farmers the chance to profit from export prospects in foreign markets.

Policy Recommendations

• Strategic: Discussions with public and private stakeholders to bring structural changes both general and commodity specific measures that may be urgently taken and at little to no financial cost. Building robust infrastructure is critical, including roads, efficient port facilities for faster trade, storage & distribution networks, processing plants, and advanced testing labs. And adopting a holistic approach to coordinate with various agencies/ ministries involved.

Operational: To empower small farmers and double their income, the focus should shift towards cluster- based group enterprises. This, combined with value- added exports (organic, processed products, etc.), skill development, strong branding, and public-private partnerships, can boost agricultural exports. Additionally, quality control measures and support for agri-startups are crucial for success