India’s prosperity lies in the hands of the farmers who constantly grow food to fulfill the nationwide need. We can credit Minimum Support Price (MSP) for providing much-needed stability to our farming community.
Minimum Support Price (MSP)
MSP is the minimum price guaranteed for crops sold by farmers. The main purpose of MSP is to evade the burden of losses that the farmers often have to face. For decades MSP has helped Indian farmers face the negative effects of financial fluctuations. It sets a floor price for the commodities below which no purchases can be made from farmers. Thus, farmers get better prices in the market. If in any case, they do not get fair prices, the government agencies buy their produce at MSP. In simple words, it is a ‘concrete assurance’ that saves the farming community.
A brief history
After independence, the situation of agriculture production in India was not ideal. Also, the farmers were unable to get fair prices for their produce. Even if they were putting all their hard work and money into growing the crops, earning their daily bread was not that easy. The purchase and sale of agricultural commodities were majorly dependent on the demands of the states. Hence, farmers faced difficulty regarding the quantity of production.
When the production output was less, prices would escalate. On the other hand, when the production output was high, prices would decrease. This phenomenon demotivated the Indian farmers. Therefore, the policymakers had to finally decide on extensive agricultural reforms which paved the way for MSP.
Finally, in 1966-67, the minimum support price (MSP) was fixed for wheat and paddy. This not only motivated the Indian farmers but also safeguarded them from price fluctuations and exploitations. Ultimately, it provided the much-needed financial stability that they deserve.
Benefits of MSP
- It ensures financial stability for farmers.
- It strengthens the agricultural system.
- It motivates the farmers to increase production.
- It gives clarity about the tentative production and income.
- It helps overcome the problem of ever-changing demand and supply chain.
Factors considered for MSP
India has two major crop seasons – Rabi and Kharif. MSP is mainly decided keeping this in mind. At the start of each cropping season, the government announces MSP. The responsibility for this task is on the Commission for Agricultural Costs and Prices aka CACP. The recommendations are truly based on some predetermined formulas. Even some technical variables are also taken into consideration. Accordingly, the government calculates the MSP for farmers.
It is significant to note that the Union Budget for 2018-19 had announced that MSPs would be kept at the level of 1.5 times the cost of production.
Crops covered under MSP
Presently, around 23 crops come under the gamut of MSP. The government provides MSP for cereals such as wheat, bajra, paddy, barley, jowar, ragi along with pulses like masur, chana, moong, urad, etc. Some oilseeds like mustard, groundnut, soybean, etc. also come under it.
MSP fixed by the government in last 10 years
MSP fixed for Kharif Crops from 2010-2011 to 2021-2022 – ( Rs. per quintal)
MSP fixed for Rabi Crops from 2010-2011 to 2021-2022 – ( Rs. per quintal)
Source – Farmer.gov.in
MSP ensures better rates in mandis
Since MSP guarantees a floor price, farmers always have an edge to get better prices in the mandis. This factor compels the traders and other stakeholders to buy commodities at a fair price. If for any reason farmers don’t get better prices, they always have an option of selling their produce at MSP to government agencies. Although, the majority of the time, they get fair prices. Thanks to the mandi system and of course the commission agents (aadhatiyas) who accommodate a fair deal for farmers.
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