Minimum Support Price (MSP) in India

The Minimum Support Price (MSP) in India serves as a government-backed mechanism to safeguard farmers from sudden drops in agricultural prices, ensuring guaranteed income and stability in the market. MSP aims to shield crops from market fluctuations, benefiting farmers and promoting investment in the farming sector.

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Table of Content

• What is Minimum Support Price (MSP) in India?
• Determination of MSP
• Calculation of MSP
• Crops covered under MSP
• Conclusion
• Frequently Asked Questions (FAQs)

What is Minimum Support Price (MSP) in India?

• Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
• Minimum Support Price guarantees the farmers an assured price for their produce, to save them from distress sales.
• It is aimed to save the crops from price fluctuations in the market.
• MSPs are announced at the beginning of the sowing season for certain crops.
• Minimum support price is recommended by the Commission for Agricultural Costs and Prices (CACP) 1985.

Objectives of MSP:

• To support the farmers from distress sales.
• To procure food grains for public distribution.

Purpose of MSP:

• To induce more investment by farmers in the farm sector.
• To motivate farmers to adopt improved crop production technologies.
• To enhance production and thereby farmers, income.

Determination of MSP

• Minimum support prices for each commodity are recommended by the Commission for Agricultural Costs and Prices (CACP) 1985.
• Commission takes into account the following factors:
  • Cost of production
  • Changes in input prices
  • Input-output price parity
  • Trends in market prices
  • Demand and supply
  • Inter-crop price parity
  • Effect on industrial cost structure
  • Effect on cost of living
  • Effect on general price level
  • International price situation
  • Parity between prices paid and prices received by the farmers.
  • Effect on issue prices and implications for subsidy

Calculation of MSP

• The Government announced to fix the MSP for crops 50 per cent above their production cost since 2018–19.
• The new MSP is fixed by the CACP over the Cost A2+Fl.
  • Cost A2: Itincludes all paid-out costs borne by the farmer on seeds, fertilisers, pesticides, hired labour, leased-in land, fuel, irrigation, etc.
  • Fl: It is the imputed cost of unpaid family labour.
• Farm activists demand it to be fixed over Cost C2.
  • Cost C2: It is amore comprehensive costthat factors in rentals and interest forgone on owned land and fixed capital assets on top of Cost A2+Fl.

Crops covered under MSP

• Minimum Support Price (MSP) in India was first introduced by the Government in 1966-67 for Wheat.
• Currently, the MSPs are announced for 14 kharif season crops, 6 rabi crops and 2 other commercial crops.
• These are mentioned below table:

Seven cereals	PaddyWheat,BarleyJowar,Bajra,MaizeRagi
Five pulses	GramArhar/TurMoongUrad Lentil
Eight oilseeds	GroundnutRapeseed/mustardToriaSoyabeanSunflower seedSesamum, Safflower seed Nigerseed
Copra
Raw jute.

Conclusion

While the Minimum Support Price (MSP) in India provides farmers with stability and protection against price volatility, its limitation lies in the challenge of accurately determining production costs and accounting for all aspects of farming. However, MSP serves as an important tool to support farmers, incentivize investment, and enhance agricultural production, contributing to the welfare of farmers and ensuring food security.

Ref: Source-1

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FAQs (Frequently Asked Questions)