Commission for Agricultural Costs and Prices (CACP)

The Commission for Agricultural Costs and Prices, or CACP, is the expert body that advises the Government of India on what the Minimum Support Price of each major crop should be. Every season, it studies how much it costs farmers to grow a crop, what is happening in markets in India and abroad, and how prices affect consumers.

It then sends a report with its recommended prices. The government, through the Cabinet Committee on Economic Affairs, takes the final decision. The CACP only recommends; it cannot fix prices on its own.

Why does it exist?

In the early 1960s, India was short of food and depended on grain imports. The government wanted farmers to use new seeds and fertilisers and grow more. But farmers would invest only if they were sure of a fair price after harvest. Someone had to calculate this price in a fair, scientific way, balancing the farmer's need for income and the consumer's need for affordable food.

If ministers simply announced prices without any expert study, prices could be too low (hurting farmers) or too high (hurting the poor who buy food). The CACP was set up to fill this gap with data and analysis.

Where did it come from?

• The body was set up on 1 January 1965 as the Agricultural Prices Commission. Around the same time, the Food Corporation of India (1965) was created to buy and store grain. Together they supported the Green Revolution.
• In 1985, it was renamed the Commission for Agricultural Costs and Prices. The new name shows that it looks at the costs of farming, not just prices.
• Its current Terms of Reference (the official list of what it must study) were given in 2009.
• In 2018-19, the Union Budget announced that MSP would be at least 1.5 times the cost of production. Since then, the CACP's recommendations follow this rule.

What kind of body is it?

The CACP is an attached office of the Ministry of Agriculture and Farmers Welfare. It was created by a government order, not by a law of Parliament. So it is a non-statutory body, and its recommendations are advisory, not binding. It is also not a constitutional body.

Who is in it?

The CACP has five members:

• a Chairman;
• a Member Secretary;
• one Member (Official), a government officer;
• two Members (Non-Official), who represent the farming community and usually have an active link with farmers.

What does it recommend prices for?

The CACP recommends MSPs for 22 mandated crops and the Fair and Remunerative Price for sugarcane:

• 14 kharif crops (sown in the monsoon): paddy, jowar, bajra, maize, ragi, arhar (tur), moong, urad, groundnut, soybean, sunflower seed, sesamum, nigerseed and cotton;
• 6 rabi crops (sown in winter): wheat, barley, gram, masur (lentil), rapeseed and mustard, and safflower;
• 2 commercial crops: jute and copra.

MSPs for toria and de-husked coconut are then fixed using the MSPs of rapeseed-mustard and copra. The FRP for sugarcane is the price sugar mills must pay farmers; it is fixed under the Sugarcane (Control) Order, 1966, also on the CACP's advice.

How does it work, step by step?

1. The CACP collects data on the cost of growing each crop, state by state. Much of this comes from the Comprehensive Scheme for the Study of Cost of Cultivation of Principal Crops, run by the Directorate of Economics and Statistics of the Agriculture Ministry.
2. It consults state governments, central ministries, farmer groups, traders and experts.
3. It studies the factors in its Terms of Reference (listed below).
4. It sends five price policy reports each year: one each for kharif crops, rabi crops, sugarcane, raw jute and copra.
5. The government considers the report, along with other factors, and the CCEA gives the final approval. The MSP is then announced, usually before sowing begins, so that farmers can plan.

You can picture the CACP like a school's exam committee that suggests the pass marks after studying the paper, while the principal (here, the CCEA) takes the final call.

What factors does it consider?

The CACP's Terms of Reference ask it to look at:

• cost of production of the crop;
• overall demand and supply, in India and abroad;
• domestic and international prices;
• inter-crop price parity (how the price of one crop compares with another that could be grown on the same land);
• terms of trade between farming and the rest of the economy (whether the prices farmers receive keep pace with the prices they pay);
• the likely effect on consumers and on the general price level;
• since 2018-19, a minimum margin of 50% over the cost of production.

How is "cost of production" measured?

The CACP uses three main cost ideas:

• A2: all costs a farmer actually pays in cash or kind, such as seeds, fertilisers, pesticides, hired labour, hired machines, diesel, irrigation charges and rent for leased-in land.
• A2+FL: A2 plus the value of family labour (FL), the unpaid work done by the farmer and family members, valued at wage rates.
• C2: the most complete cost. It adds to A2+FL the rent the farmer's own land could have earned and the interest the farmer's own money could have earned.

A simple example: a farmer spends ₹1,000 on seeds and fertiliser (A2). The family's own work is worth ₹300 (so A2+FL is ₹1,300). If the owned land could have been rented out for ₹400 and the money invested could have earned ₹100, C2 would be ₹1,800. The government's 1.5-times rule uses A2+FL, not C2.

India's position and examples

• For Rabi Marketing Season 2027-28, the margin over A2+FL cost ranges from 50% for safflower to 106% for wheat.
• Higher MSPs for pulses and oilseeds are used to encourage crop diversification, along with the National Mission on Edible Oils (Oilseeds) and the Mission for Aatmanirbharta in Pulses (2025-26 to 2030-31).
• The National Commission on Farmers, chaired by Prof. M.S. Swaminathan, gave five reports between December 2004 and October 2006. It recommended that MSP be at least 50% above the weighted average cost of production. Farmer groups read this as C2 + 50%.

Commonly confused concepts

• CACP vs CCEA: the CACP only recommends MSPs; the Cabinet Committee on Economic Affairs, chaired by the Prime Minister, approves them.
• CACP vs FCI: the CACP suggests prices; the Food Corporation of India actually buys, stores and moves grain.
• MSP vs FRP: MSP is a support price the government offers to buy at. FRP is the minimum price sugar mills are legally bound to pay cane farmers.
• A2+FL vs C2: A2+FL leaves out the value of owned land and capital; C2 includes them. C2 is always higher.
• Non-statutory vs statutory body: the CACP was created by a government order; a statutory body (like SEBI) is created by an Act of Parliament.
• Rabi Marketing Season vs crop year: the Rabi Marketing Season 2027-28 refers to the selling season of crops sown in winter 2026 and harvested in early 2027.

Issues, criticism and the way forward

• Which cost to use: farmer groups argue that MSP should be based on C2, as they read the Swaminathan Commission's advice. The government uses A2+FL. This is the biggest debate around the CACP.
• Advisory only: because the CACP is non-statutory, its recommendations can be changed by the government. Some have suggested giving it statutory status for more independence. In December 2024, the Parliamentary Standing Committee on Agriculture recommended a legally binding MSP.
• Data delays: cost-of-cultivation data often come with a time lag of two or more years, so sudden jumps in costs (like diesel or fertiliser) may not be fully captured.
• Uneven benefit: MSP matters most where the government actually buys the crop, mainly wheat and rice in a few states. For many crops, market prices fall below MSP without any government purchase.
• States' views: states send their own recommendations, which are often higher, and some feel these are not given enough weight.
• Way forward: experts suggest faster and more detailed cost data, stronger procurement for pulses and oilseeds, price-deficiency payments where buying is not possible, and a more transparent explanation of how the final MSP differs from the CACP's advice.

Concepts to Know

• Quintal: a unit of weight equal to 100 kg. ₹25 per quintal is therefore 25 paise per kg.
• Kharif and rabi: kharif crops are sown with the monsoon (June-July) and harvested in autumn; rabi crops are sown in winter (October-December) and harvested in spring.
• Procurement: the government buying crops directly from farmers at the MSP, mainly through the Food Corporation of India and state agencies.
• Imputed cost: a cost the farmer does not pay in cash but which still has value, such as the family's own labour or the rent their own land could earn.
• Attached office: a government office that works under a ministry and gives it technical or expert support.
• Inter-crop price parity: keeping the prices of competing crops balanced, so that farmers do not all shift to one crop and create a shortage of another.