Recently, Cabinet approved MSP hikes for all 14 kharif season crops.
More On News
- In alignment with the government’s “clear policy” of keeping MSPs at least 1.5 times above the cost of production as calculated by the government
- However, only four of these crops have MSPs that will provide farmers with a margin of more than 50% above their production costs
- Bajra (77%)
- Arhar dal (59%)
- Maize (54%)
- Black gram (52%)
Enroll now for UPSC Online Classes
| Determinants Of MSP
While recommending price policy of various commodities under its mandate, the Commission keeps in mind the various Terms of Reference (ToR) given to CACP in 2009.
- 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
|
What is the Minimum Support Price?
- Minimum Support Price (MSP) is a government-supported agricultural price policy implemented in India to ensure that farmers receive a fair and remunerative price for their crops.
- MSP is price fixed by the Government of India to protect the producer – farmers – against excessive fall in price during bumper production years.
- Minimum support prices are a guarantee price for their produce from the Government.
- 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.
- Who Recommends? : MSPs 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).
- Final Decision: Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by CACP.
Crops Under MSP
- The Commission for Agricultural Costs & Prices (CACP) recommends minimum support prices (MSPs) for 22 mandated crops and the Department of Food & Public Distribution determines fair and remunerative prices (FRP) for sugarcane.
- The mandated crops are 14 crops of the kharif season, 6 rabi crops and two other commercial crops.
- In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.
- Here is a list of some major crops for which MSP is typically announced:
- Kharif Crops (14): Paddy, Bajra, Jowar, Maize, Arhar (Pigeon Pea), Ragi, Moong (Green Gram), Groundnut-in-shell, Urad (Black Gram), Soyabean, Niger seed, Sunflower, Sesamum, Cotton.
- Rabi Crops (6): Barley, Wheat, Gram, Rapeseed/Mustard seed, Masur (Lentil), Jute.
- Other Commercial Crops (2): Copra, Safflower.
Challenges Hindering MSP’s Effectiveness
- Limited Scope of Procurement: Despite MSPs being announced for multiple crops, the actual government procurement at MSP is largely restricted to a few staples like wheat and rice.
- Regional Disparities in Procurement: MSP benefits are disproportionately accessible to farmers in certain regions, particularly those in Punjab and Haryana, where procurement infrastructure is robust.
- In contrast, farmers in eastern or northeastern regions rarely benefit from MSP due to inadequate infrastructure and awareness.
- Role of Middlemen: Despite MSP regulations, middlemen often exploit farmers, forcing them to sell their produce below the MSP, profiting from the differential.
- Increasing food subsidy burden, prompting calls for rationalization.
Check Out UPSC NCERT Textbooks From PW Store
CACP Projects Three Kinds Of Production Cost For Every Crop
- A2 – It covers all paid-out costs directly incurred by the farmers in cash and kind on seeds, fertilizers, pesticides, hired labor, leased-in land, fuel, irrigation, etc.
- A2+FL – It includes A2 + An imputed value of unpaid family labour
- C2 – It is a more comprehensive cost that factors in rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL.
- CACP considers both A2+FL and C2 costs while recommending MSP while it reckons only A2+FL cost for return
- C2 costs are used by CACP as benchmark opportunity costs to check if the MSPs recommended by them at least cover these costs in some of the major producing states.
|
Way Forward
- Reduce the dominance of rice and wheat, the government can gradually expand the list of crops eligible for MSP support.
- Improve and modernize procurement mechanisms to ensure that farmers have access to MSPs
- Alternate income models: Instead of relying on MSP alone, the government needs to explore alternate models to boost farmer’s income like horticulture.
June 20, 2024
