How MSP is Calculated

♤ MSPs of 23 crops is recommended by Commission for Agricultural Costs and Prices (CACP).

♤ It adopts several cost concepts like A2, FL and C2

o Cost A2 – Includes the actual costs paid by farmer for purchase of various inputs like seeds, fertilisers, pesticides, hired labour, rent of land & machinery, if hired.

o Cost A2 +FL – FL refers to Family Labour. If the hitherto unaccounted family labour cost is accounted and added to cost A2, it becomes A2+FL.

o Cost C2 – C2 stands for Comprehensive Cost. It includes notional costs of family labour, notional rent of owned land and notional interest on owned capital.

♤ M.S Swaminathan headed National Commission on Farmers recommended a 50 per cent margin over C2, which is also being the demand of the farmers.

♤ For rabi crop the government is using 50 per cent margin of Cost A2 or cost A2+FL. But even then the MSPs given by the government is less than cost C2.