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MSP

What is MSP?

1. Minimum Support Price (MSP) is the guaranteed price of notified crops as declared by the Government of India for public procurement purposes.

2. It acts as a safety net for farmers by protecting their business interests from the uncertainties of the market due to various natural and market forces.

3. Under the Indian conditions, crop production often fluctuates affecting market prices and prospects of the crop in the next sowing season. It may affect the supply.

4. To counter such situations, MSP is fixed by the Government which infuses confidence in farmers despite turnarounds in prices.

Which crops are notified for MSP?

1. Government of India notifies MSP for 23 ‘Kharif’ and ‘Rabi’ crops at the start of each cropping season that include selected commercial crops as well.

2. 7 cereals – paddy, wheat, maize, sorghum, pearl millet, barley and ragi.

3. 7 oilseeds – groundnut, rapeseed, mustard, soybean, sesamum, sunflower, safflower and niger seeds.

4. 5 pulses – chickpea, tur, moong, urad and lentil.

5. 4 commercial crops – copra, sugarcane, cotton and raw jute.

How is MSP calculated?

1. MSP is fixed by the Government on the recommendations of the Commission for Agricultural Costs and Prices (CACP) which is a statutory body.

2. CACP submits its recommendations to the Government in the form of price policy reports twice a year separately for Kharif and Rabi seasons.

3. The Union Government considers the report, takes the view of the state Governments and also deliberates on the overall demand and supply situations in the country to fix the final MSPs.

4. Post-harvest, the Government procure crops from farmers at the MSP across APMC mandis and procurement centres.

Criteria for calculating cost of production:

To calculate the cost of production, the National Commission for Farmers has suggested three criteria:

1. A2- It includes the cost of various inputs such as seeds, fertilizers, labour, fuel, irrigation, etc.

2. A2+FL – It includes the cost of unpaid family labour in A2 parameters.

3. C2- It includes the implied rent on land and interest on capital assets over and above A2+FL.

Government implemented the recommendation during the marketing season of 2018-19 by fixing MSPs over and above at least 50% of the cost of production.

Why is MSP important in India?

1. The MSP regime was introduced in India in 1966-67 under which MSP for wheat was fixed for the first time at Rs. 54 per quintal.

2. During the 1960s, when the Green revolution was introduced, the Government realised that the farmers needed incentives to grow food grains.

3. This was important for wheat and paddy which are labour intensive and don’t get good prices.

Conclusion:

Introduction of MSP has been a successful move that made India self-reliant in food grain production.