What is MSP?
- Minimum Support Price (MSP): MSP is a pre-announced price set by the Government of India to purchase directly from farmers for certain crops. It ensures that farmers have a minimum profit for their harvest in case the open market prices fall below the cost of production.
- Objective: To safeguard farmers from price fluctuations and market failures.
- Non-Binding: Farmers are not obligated to sell their produce at MSP; they can sell at higher prices in the open market if available.
History of MSP in India:
-
Introduction (1965): MSP was introduced in 1965 during the Green Revolution to encourage farmers to adopt modern agricultural practices and increase productivity. The Food Corporation of India (FCI) and the Agricultural Prices Commission (now the Commission for Agricultural Costs and Prices or CACP) were established to implement MSP policies.
-
Objective: Initially focused on ensuring food security by incentivizing the production of essential food grains like wheat and rice.
-
Expansion: Over the decades, the list of crops under MSP expanded to include pulses, oilseeds, and commercial crops to ensure price stability and meet the diverse needs of farmers.
-
Economic Reforms (1990s): Despite liberalization, MSP continued to be a critical mechanism for stabilizing farm incomes.
-
Recent Trends: MSP has become a topic of political debate, especially regarding its implementation, coverage, and perceived effectiveness in benefiting small and marginal farmers.
How MSP is Decided in India:
The Government of India decides MSP based on recommendations from the Commission for Agricultural Costs and Prices (CACP).
-
Key Factors Considered:
- Cost of Production: MSP takes into account the cost incurred by farmers, including inputs like seeds, fertilizers, labor, irrigation, and transportation.
- Demand and Supply: Market dynamics of each crop are considered.
- Price Trends: Trends in domestic and international markets for the crop.
- Inter-crop Price Parity: Ensures balanced price incentives across different crops to prevent over-cultivation of certain crops.
- Terms of Trade: Evaluates the trade balance between agriculture and non-agriculture sectors.
- Risk Factors: Factors like weather conditions, pest infestations, and crop diseases are assessed.
-
Types of Costs Considered:
- A2: Covers all paid-out costs directly incurred by farmers (seeds, fertilizers, hired labor, etc.).
- A2+FL: Includes A2 costs plus the value of family labor.
- C2: Comprehensive cost including A2+FL, plus the rental value of owned land and interest on fixed capital. (C2 is often considered for calculating profit margins.)
-
Government Approval: Based on CACP’s recommendations, the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, finalizes the MSP.
-
Announcement: MSP is announced at the beginning of each sowing season, providing assurance to farmers about price support.
Crops on which MSP is Given:
As of now, MSP is provided for 22 mandated crops and sugarcane (through Fair and Remunerative Price or FRP). These crops are categorized as follows:
-
Cereals:
- Paddy (rice)
- Wheat
- Maize
- Barley
- Sorghum (jowar)
- Pearl millet (bajra)
- Ragi
-
Pulses:
- Gram (chana)
- Tur (arhar)
- Moong
- Urad
- Lentils (masur)
-
Oilseeds:
- Groundnut
- Soybean
- Mustard/rapeseed
- Sunflower
- Safflower
- Sesame
- Niger seed
-
Commercial Crops:
- Cotton
- Jute
- Copra
- Sugarcane (through FRP mechanism)
MSP is a crucial component of India’s agricultural policy aimed at protecting farmers from volatile market conditions. While MSP has historically played a significant role in ensuring food security and farmer welfare, its effectiveness depends on robust implementation, widespread procurement infrastructure, and raising awareness among farmers about its benefits.
.png)
){kind=link}