Minimum Support Price (MSP)

Why in news?

Rabi crop MSP to be hiked for next season

Minimum Support Price (MSP)

  • 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.
  • The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • The minimum support prices are a guarantee price for their produce from the Government.
  • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
  • In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
  • The following factors are taken into account while determining MSP for food grains:
  • Demand and supply.
  • Cost of production.
  • Price trends in the market, both domestic and international.
  • Inter-crop price parity.
  • Terms of trade between agriculture and non-agriculture.
  • A minimum of 50 percent as the margin over cost of production.
  • Likely implications of MSP on consumers of that product.

Types of Production Costs

  • According to The Commission for Agricultural Cost and Prices (CACP), there are three types of production costs:
  • A2=A2 costs basically cover all paid-out expenses, both in cash and in-kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel, irrigation, etc.
  • A2+FL= It covers actual paid-out costs plus an imputed value of unpaid family labour.
  • C2=C2 costs are more comprehensive, accounting for the rentals and interest forgone on owned land and fixed capital assets
  • Yet government has announced to keep MSP at 50% more than A2+FL, which is lower than C2.

Crops covered under MSP

  • Government announces minimum support prices (MSPs) for 22 mandated crops and fair and remunerative price (FRP) for sugarcane.
  • The mandated crops are 14 crops of the kharif season6 Rabi crops and 2 other commercial crops.
  • MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.
  • The lists of crops are as follows.
  • Kharif crops
  1. Paddy(common)
  2. Jowar (hybrid)
  3. Bajra
  4. Maize
  5. Ragi
  6. Arhar(tur)
  7. Moong
  8. Urad
  9. Cotton (medium staple)
  10. Groundnut in shell
  11. Sunflower seed
  12. Soya been
  13. Sesamum
  14. Niger seed
  • Rabi Crops
  1. Wheat
  2. Barley
  3. Gram
  4. Masur (lentil)
  5. Rapeseed/mustard
  • Toria
  1. Safflower
  • Other crops
  1. Jute
  2. Copra (Milling)
  • De-Husked Coconut
  • Fair And Remunerative Price(FRP) for Sugarcane

Commission for Agricultural Cost and Prices (CACP),

  • It is a statutory panel under the Ministry of Agriculture
  • It came into existence in January 1965.
  • Currently, CCEA comprises Chairman, Member Secretary, one Member (Official) and two Members (Non-Official).
  • The non-official members are representatives from farming community and usually have active association with farming community.
  • Its suggestions are not binding on the government.

Leave a Reply

Your email address will not be published. Required fields are marked *