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Minimum Support Price (MSP) - Coggle Diagram
Minimum Support Price (MSP)
What is MSP?
It is the guaranteed ‘minimum floor price’ that farmers must get
Price at which govt purchases crops from the farmers.
Objectives behind MSP
It works as an insurance policy
It helps prevent distress sale and incentivize production
To support farmers from excess fall in crop prices
Commodities covered by MSP
Eight Oilseeds:
Groundnut, Rapeseed/Mustard, Toria, Soyabean, Sunflower, Sesamum, Niger seed and Safflower seed.
Five Pulses:
Gram, Arhar, Moong, Urad and Lentil.
Cash Crops:
Raw Cotton, Copra, Raw Jute and Virginia Flu Curved Tobacco.
Seven cereals:
Paddy, Wheat, Jowar, Bajra, Barley, Maize and Ragi.
MSP: Historical Context
1965: Agricultural Price Commission
1985: Renamed as Commission for Agriculture Cost and Price in 1985 ( LK JHA Committee)
Ensuring reasonable food prices for consumers
At Rs 54 per quintal, the MSP for wheat was fixed for the first time.
Debate started in the mid 1960’s amid food shortages
Legal backing for MSP
Not an entitlement for farmers
Cannot be demanded as a matter of right
It is devoid of any legal backing
Exceptions to MSP: Fair and remunerative price (FRP)
Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act
FRP is payable by sugar mills only
For sugarcane
Calculation of MSP
C2:
Comprehensive Cost which takes into account for rent and interest foregone on the land and machinery owned by farmers further in addition to the A2+FL rate.
A2+FL:
Estimated value of the unpaid labour for harvesting crops like the contribution of family members, etc.
Need for MSP
To achieve food security
Motivates farmers to grow targeted crops and increased production
Helps farmers make informed decision
Hedging them from market fluctuations
Vast population dependent on agriculture
Issues with MSP
Lack of storage for APMCs
Issues in WTO
Procurement related problems
Market distortion and killing of Competition
MSP do not reach all farmers and for all crops
Ecological issues created by surplus production
MSP do not increase at par with increase in cost of production
Various committees on MSP
Ramesh Chandra Committee:
Methods of MSP fixation
NITI Aayog:
Price Deficiency Payment as a alternative to MSP
2004:
National Commission on Farmers (NCF)
Way forward
Declare MSP for all types of crops
Easing procurement and minimizing storage losses and costs
Market Intervention Scheme (MIS) for perishable food items
Eliminating the middlemens
Alternate models to boost farmer’s income