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Minimum Support Price (MSP) - Coggle Diagram
Minimum Support Price (MSP)
What is MSP?
NOT an entitlement for farmers
Centre currently fixes MSPs for 23 commodities based on CACP recommendations
A fixed price for crops, well above production costs
Fixing of MSPs
Supply and demand situation
Market price trends (domestic and global)
Cost of cultivation
Implications on Consumers, environment
What changed with 2018 budget?
A predetermined principle
MSPs be fixed at 1.5 times of the production costs
How was this production cost arrived at?
‘A2+FL’
includes A2 plus an imputed value of unpaid family labor.
'A2’
covers all paid-out costs directly incurred by the farmer
‘C2’
is a more comprehensive cost that factors in rentals and interest forgone
CACP projects three kinds of production cost:
Farmers demand over legalization
Mandatory purchase at MSP
Surplus payment by the govt
Private traders’ responsibility
Expansion of C2 to include capital assets
Legal entitlement
Issues with legal backing
States responsibility
Limited success of Sugar FRP
Demand-supply dynamics
Withdrawal of traders due to mandatory pricing
Lower market prices
High costs to govt
Analysis of legal MSP
Lack of technology
Irrigation and storage problem
Information deficit
New loopholes eg Black marketting
MSP is only one part of the problems farmers face
Conclusion
Investing in agri-infra
No over-reliance on MSP ex. Punjab, Haryana
Direct cash transfers ex. PM-KISAN, Ryuthu Bandhu
Crop diversification
Guarantee minimum “incomes”, as against “prices”