• The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has given its approval for the Minimum Support Price (MSP) for copra for 2024 season. 

• The MSP of fair and average quality (FAQ) ball copra has been increased by Rs 250 to Rs 12,000 per quintal, while milling copra support price has been hiked by Rs 300 to Rs 11,160 per quintal for the next year.

• This will ensure a margin of 51.84 per cent for milling copra and 63.26 per cent for ball copra, which are well beyond 1.5 times the all India weighted average cost of production.

• In order to provide remunerative prices to the cultivators, in the Union Budget of 2018-19, the government announced that MSPs of all the mandated crops will be fixed at a level of at least 1.5 times of all India weighted cost of production. 

• Milling copra is used to extract oil, while ball/edible copra is consumed as a dry fruit and used for religious purposes.

• Kerala and Tamil Nadu are major producers of milling copra, whereas ball copra is produced predominantly in Karnataka.

• In the last 10 years, the government has increased MSP for milling copra and ball copra from Rs 5,250 per quintal and Rs 5,500 per quintal, respectively in 2014-15 to Rs 11,160 per quintal and Rs 12,000 per quintal each in 2024-25 season.

• A higher MSP will not only ensure better remunerative returns to the coconut growers but also incentivise farmers to expand copra production to meet the growing demand for coconut products both domestically and internationally.

What is MSP?

• The Minimum Support Price (MSP) mechanism provides a price guarantee to farmers for their produce. This is implemented across the country as nearly 86 per cent farmers fall under the small and marginal category. It also helps in stabilising prices in the market and thus services the consumers as well.

Genesis of MSP

• India inherited an agrarian economy from the British with the agriculture and allied sector contributing to around three-fourths of the Gross Domestic Product (GDP) and providing employment to more than four-fifth of the population. 

• The food shortages faced during the mid-1960s pushed India to reform its agricultural policy and accordingly India adopted significant policy reforms focused on the goal of achieving food grain self-sufficiency.

• Series of institutional reforms were undertaken to boost agricultural production and to modernise farming practices. These included land reforms, structural changes in the agricultural administrative arrangements, agricultural extension schemes, initiation of price support policies including the introduction of the minimum support price (MSP) for major agricultural produces, introduction of new technologies (popularly known as the green revolution), strengthening of agricultural research, etc. 

What is the significance of MSP?

• The prices of agricultural commodities are inherently unstable, primarily due to the variation in their supply, lack of market integration and information asymmetry. A very good harvest may result in a sharp fall in the price of that commodity during that year which in turn will have an adverse impact on the future supply as farmers withdraw from sowing that crop in the following years. This causes paucity of supply next year and hence, major price increase for consumers.

• To counter this, the MSP for major agricultural products is fixed by the government, each year. 

• MSP is a tool which gives guarantee to the farmers, prior to the sowing season, that a fair amount of price is fixed to their upcoming crop to encourage higher investment and production of agricultural commodities. 

• The MSP is in the nature of an assured market at a minimum guaranteed price offered by the government.

What is the process to fix MSP?

• The Commission for Agricultural Costs & Prices (CACP) is an attached office of the ministry of agriculture and farmers welfare. It was established in January 1965. 

• It is mandated to recommend MSPs to incentivise the cultivators to adopt modern technology, and raise productivity and overall grain production in line with the emerging demand patterns in the country. 

• MSP for major agricultural products are fixed by the government, each year, after taking into account the recommendations of the commission.

• CACP recommends MSPs of commodities, which comprise cereals, pulses, oilseeds and commercial crops.

• CACP submits its recommendations to the government in the form of price policy reports every year, separately for five groups of commodities namely kharif crops, rabi crops, sugarcane, raw jute and copra. 

• Before preparing aforesaid five pricing policy reports, the Commission draws a comprehensive questionnaire, and sends it to all the state governments and concerned national organisations and ministries to seek their views.

• Subsequently, separate meetings are also held with farmers from different states, state governments, national organisations like Food Corporation of India (FCI), NAFED, Cotton Corporation of India (CCI), Jute Corporation of India (JCI), trader’s organisations, processing organisations, and key central ministries. 

• The Commission also makes visits to states for on-the-spot assessment of the various constraints that farmers face in marketing their produce, or even raising the productivity levels of their crops. Based on all these inputs, the Commission then finalises its recommendations/reports, which are then submitted to the government.

• The Cabinet Committee on Economic Affairs (CCEA) takes a final decision on the level of MSPs and other recommendations made by the CACP.

Fixing MSP of copra

The Commission has recommended the MSP for Copra for the 2024 season after examining and taking into account various factors affecting coconut farming such as:

i) The cost of production of coconut and copra.

ii) Overall demand and supply of copra and coconut oil.

iii) The trend in the domestic and global prices of coconut products, coconut oil and other vegetable

oils.

iv) Profitability of coconut vis-à-vis other crops.

v) A minimum of 50 per cent margin over cost of production. 

• The Commission also held consultations and in-depth discussions with the officers of the central and state governments of major coconut producing states, coconut farmers, farmers’ representatives, industry representatives, industry associations and research institutions in order to seek information and views on different aspects of the coconut economy.

India is the largest producer of coconut

• India is the largest producer of coconut in the world, followed by the Philippines and Indonesia.

• India, Philippines and Indonesia accounted for 73.7 per cent of the world’s coconut production of about 65.7 billion nuts in 2022.

• Coconut is an important plantation crop of India, occupying about 2.2 million hectare area, and has great potential for generating employment and enhancing farmers’ income due to multiple uses of coconut and value-added products. 

• Coconut production in the country is estimated at 13.5 million tonnes in 2022-23, marginally higher than in 2021-22. 

• The coconut production in India is concentrated in southern states. Kerala, Karnataka, Tamil Nadu and Andhra Pradesh accounted for 89.4 per cent of coconut area and 90.9 per cent of coconut production last year.

• During the last two decades, production of coconut has exhibited cyclical fluctuations due to adverse climatic events and other abiotic and biotic stresses. The country faced major cyclones in both eastern and western coasts, which resulted in uprooting of many coconut palms especially in Tamil Nadu, Odisha and Andhra Pradesh. 

• Small landholding, low irrigation coverage in some states, drought conditions in Karnataka and Tamil Nadu, senile and unproductive palms, poor management, rising costs due to high wages and input prices, and volatile price of coconut and coconut-based products have contributed to fall in coconut cultivation in the country during the last decade. 

• The usage of coconuts has evolved over the past decades. According to the Coconut Development Board (CDB), of the total production of coconuts, about 12 per cent is consumed in the tender form for drinking purposes and remaining is used as mature coconuts for domestic and industrial purposes.

• Two types of copra are produced in India, milling copra and ball copra. Milling copra is used to extract oil, while ball/edible copra is consumed as a dry fruit and used for religious purposes. 

• According to Coconut Development Board (CDB) estimates, out of total production of coconut in India about 45.8 per cent is used for making copra, about 33 per cent for milling copra and 12.8 per cent for ball copra. 

• Milling copra production is mainly concentrated in Kerala and Tamil Nadu. 

• In case of edible/ball copra, Karnataka has a dominant position.

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