MSP, Mandis and the Farm Laws
How MSP Is Calculated
MSP is set using cost concepts like A2+FL and C2, and the government's 2018 rule promised at least 1.5 times the A2+FL cost.
Costs decide the floor.
A2+FL
Paid-out costs plus the imputed value of family labour.
C2
A broader cost including rent on owned land and interest on capital.
Swaminathan
A 2006 commission recommended MSP at C2 plus 50 per cent.
Policy
The government announced in 2018 that MSP would be at least 1.5 times A2+FL, which is lower than C2 plus 50 per cent.
A cost stack
Adding rent for owned land to a farmer's cost raises the measured cost of production.
Assuming there is only one definition of cost
Different definitions change the MSP.
Key takeaways
- A2+FL includes family labour.
- C2 is broader.
- Swaminathan advised C2+50%.
- The government uses A2+FL.
No recording for this one yet - EconReader can read it aloud for you.