The Commission for Agricultural Costs and Prices (CACP) is an expert body and a statutory panel under the Ministry of Agriculture & Farmers' Welfare, Government of India, that functions as an advisory institution. It was originally established in January 1965 as the Agricultural Prices Commission to address the problem of price instability and low productivity in the agricultural sector. The Commission was renamed the Commission for Agricultural Costs and Prices in 1985.
The primary mechanism of the CACP is to recommend the Minimum Support Prices (MSPs) for 23 commodities, including Kharif and Rabi crops, to the Cabinet Committee on Economic Affairs (CCEA). The CACP's recommendations are based on a comprehensive set of factors, including the cost of production, price trends in domestic and international markets, and the terms of trade between agriculture and non-agriculture sectors. The cost of production is calculated using different formulae, notably A2+FL (actual paid-out costs plus the imputed value of family labour) and C2 (A2+FL plus the imputed rental value of owned land and interest on fixed capital).
The CACP's work is intrinsically connected to the Minimum Support Price (MSP) policy, which is a crucial instrument for providing price stability and a fair return to farmers. The final decision on MSP is taken by the CCEA, and the procurement is often handled by the Food Corporation of India (FCI) and other state agencies. A significant recent change is the government's principle, followed since 2018-19, of setting the MSP at a minimum of 1.5 times the A2+FL cost of production for all mandated crops. However, the CACP's suggestions are not legally binding on the government, and the MSP policy itself lacks statutory backing.