India Declares MSP for Summer Crops; Pakistan Caves Under IMF Pressure

The Indian government's Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved an increase in the Minimum Support Prices (MSP) for 14 summer crops for the marketing season of 2025-26. The total outlay stands at USD 24.1B a majority of which is to fulfil the free ration promise to 800M citizens. Paddy MSP has been raised to USD 27.6 per quintal based on the A2+FL formula which is the cost incurred by the farmer and the value of family labor. It is not based on the C2+50% formula which includes the input cost of capital and the rent on the land plus 50% returns to the farmer and is the primary demand of Panjab's farmers. Under pressure from the International Monetary Fund (IMF), the Pakistan govt. did not declareMSP for 2024-25. Nor has Pakistan’s Agricultural Storage and Services Corporation Ltd, the country’s equivalent of India's Food Corporation of India procured a single tonne this harvest season. Pakistan’s decision to dispense with MSP and govt. procurement of wheat are part of the conditions linked to an Extended Fund Facility loan of $7,113M from the IMF to be disbursed from 2024-25 to 2027-28. Meanwhile, in Panjab the paddy sowing season has started. The crop is cultivated on over 3.3M hectares in the state, of which 73% is irrigated by tubewells. Of the 3.2M hectares under paddy last year, 680K hectare area was under basmati paddy. It is expected to go up to 700K hectares in 2024-25. However, Panjab faces a severe diammonium phosphate (DAP) fertilizer shortage. Against the requirement of 200K MT for both paddy and maize crops, the total fertilizer allocated to the state this season so far is just 47K MT. Power demand is expected to cross 17K MW this season, given the recent trend of high consumption and it all depends on monsoon rains. Meanwhile in 2025, India's major banks have already written off corporate loans worth USD 5.5B as against USD 3.8B in 2024 (earlier coverage).