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What is Minimum Support Price (MSP)? – Complete Details – 10 Key Facts
Table of Contents
Introduction to Minimum Support Price UPSC
Welcome to PreCrack! Even if you are not a newspaper person, it’s impossible to being not aware of Farmer’s Protest 2024. In this protest, there is one term that has coined so many time and that is MSP. Do you know what MSP is?
If you don’t, no worries! In this blog, we will provide you all details about MSP such as what MSP is, its purpose, features, functions, history, fixing process, types of production cost, its need, impacting factors and more. If you are also preparing for major competitive examinations in India, then this blog will help you in&out knowing about MSP.
So, let’s start-
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Why MSP is in the News? – UPSC Current Affairs on MSP
Recently, MSP (Minimum Support Price) has been in the news in India primarily due to ongoing farmer protests and debates. Farmers are demanding a legal guarantee for MSP on all crops, aiming to shield themselves from market volatility.
They also seek the full implementation of the Swaminathan Commission’s recommendations, fixing MSP at 50% above the comprehensive cost of production. The government, however, argues that ensuring MSP for all crops may lead to unsustainable subsidies and market distortions, expressing concerns about potential food price hikes and inflation.
The issue gained prominence during protests against the now-repealed Farm Laws, as farmers feared the laws would weaken MSP, affecting India’s agricultural backbone, causing farmer distress, and carrying significant political implications.
What is MSP (Minimum Support Price)?
Minimum Support Price (MSP) is a price set by the government to ensure that farmers receive a minimum price for their crops, protecting them from market fluctuations and ensuring a steady income.
The MSP is announced by the government before the sowing season for various crops. If the market price falls below the MSP, the government agencies step in to purchase the crops from farmers at the MSP, providing them with a guaranteed income.
MSP is particularly significant in countries like India, where agriculture is a crucial part of the economy, and many farmers depend on it for their livelihood. It is aimed at promoting agricultural production and safeguarding farmers’ interests by assuring them a fair price for their produce.
Details about Minimum Support Price – MSP in India
We have added all details about MSP in India below-
About Minimum Support Price (MSP) – About MSP in India
Minimum Support Price (MSP) is a government-set floor price for agricultural commodities, ensuring farmers receive a minimum value for their produce. It shields them from market uncertainties, encouraging agricultural production and providing economic stability. MSP is crucial in countries like India, supporting farmers’ livelihoods and food security initiatives.
Full Form of MSP
MSP stands for Minimum Support Price. It is a government-set benchmark price for agricultural commodities to ensure farmers receive a minimum income, safeguarding them from market uncertainties and promoting agricultural stability.
Meaning of MSP with example
MSP, or Minimum Support Price, is the lowest price set by the government to ensure farmers receive a fair amount for their crops. It acts as a safety net, protecting farmers from low market prices and promoting stable income in agriculture.
Example-
For example, if the government sets an MSP of ₹100 for a kilogram of wheat and market prices fall below that, the government ensures farmers receive at least ₹100 per kilogram when selling their wheat. This helps farmers maintain a stable income and protects them from market fluctuations.
Where a Farmer can Sell their crops on MSP?
Farmers can sell their crops at Minimum Support Price (MSP) at designated procurement centers. These centers are typically set up by government agencies such as the Food Corporation of India (FCI), National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), and State Civil Supplies Corporations.
Additionally, Agricultural Produce Market Committees (APMCs) and designated mandis are also involved in MSP transactions. Farmers can bring their produce to these authorized centers during the procurement seasons for specific crops, and government agencies ensure the purchase at the MSP to support farmers and stabilize market prices.
What is History of MSP in India
We can understand the History of MSP through following points-
- Start in the 1960s: MSP began because in the 1960s, India didn’t have enough food due to droughts and war.
- Green Revolution Time: In the same period, the Green Revolution started, using new methods to produce more crops.
- Agricultural Price Commission (APC): They made a group in 1965 to decide prices and set the Minimum Support Price (MSP) to help farmers.
- Changed to CACP: Later, in 1985, they changed the group’s name to the Commission for Agricultural Costs and Prices (CACP).
- Other Groups Involved: Different groups like the Food Corporation of India (FCI) and the National Agricultural Co-operative Marketing Federation (NAFED) also help.
- More Crops, Less Balance: MSP made more wheat and rice, but there wasn’t enough focus on other crops like pulses and oils.
- Some Places Get More Benefits: MSP didn’t help all areas equally; some places got more advantages.
- Farmers Don’t Know Much: In 2013, many farmers didn’t know about MSP, and awareness was different in each state.
- Not Many Sales at MSP: In 2018-19, only a small part of crops like paddy and wheat were sold at MSP.
- Plans to Help Farmers: They tried different plans like the Price Support Scheme (PSS) and the Farmer Income Protection Scheme (PM AASHA) to make sure farmers get fair prices. They even made a new way (Price Deficiency Payment – PDP) to pay farmers when they couldn’t sell at MSP.
What is MSP Fixation Process?
The Minimum Support Price (MSP) fixation process in India involves the following key steps:
1. Commission for Agricultural Costs and Prices (CACP)
- Role: The CACP, an advisory body under the Ministry of Agriculture, plays the primary role in recommending MSPs for various crops.
- Recommendations: The CACP gathers extensive data and calculates the cost of production, taking into account:
- A2 + FL: All paid-out costs incurred by the farmer (seeds, fertilizers, labor, machine costs, etc.) plus an imputed value of unpaid family labor.
- C2: A2+FL plus imputed costs like rent and interest on owned land and capital.
- Other Factors: Input costs, market prices (domestic and international), demand-supply factors, price parity between crops, and likely impact on consumers.
2. Government Consideration
- Analysis of Recommendations: The government analyzes the CACP’s recommendations along with feedback from state governments, farmer organizations, and experts.
- Budgetary Constraints: The government also considers financial and budgetary limitations.
- Policy Goals: The MSP level needs to align with broader policy goals like inflation control and food security.
3. Cabinet Decision
- Final Approval: The Cabinet Committee on Economic Affairs (CCEA), headed by the Prime Minister, makes the final decision on MSPs based on the recommendations and the government’s assessment.
4. Announcement
- Twice a Year: The government announces the MSPs for each crop twice a year, before the Kharif and Rabi sowing seasons.
Is there any MSP Law in India?
In India, there isn’t a specific law guaranteeing Minimum Support Price (MSP) for all crops. Here’s how the MSP system works:
1. Recommendation
The Commission for Agricultural Costs and Prices (CACP) suggests MSPs for different crops.
2. Government Decision
The government reviews these suggestions, considering factors like market conditions, budget, and food security, to decide the final MSPs.
3. Procurement
While the government announces MSP, it’s not legally bound to buy all crops at MSP. Procurement mainly focuses on essential crops like wheat and paddy for ensuring food security.
Types of Production Cost
In agriculture, various production costs contribute to the overall expenditure involved in cultivating crops or raising livestock. Here are different types of production costs in agriculture:
1. Variable Costs
- Seed Costs: Expenses related to purchasing seeds for planting.
- Fertilizer Costs: Expenditure on fertilizers to enhance soil fertility.
- Pesticide Costs: Expenses for insecticides, herbicides, and other pest control measures.
- Water Costs: Cost associated with irrigation and water supply.
2. Fixed Costs
- Land Costs: Expenses related to acquiring or renting agricultural land.
- Equipment Costs: Capital and maintenance costs for machinery and equipment used in farming.
- Building Costs: Expenses for constructing or maintaining farm buildings and structures.
- Insurance Costs: Premiums for insuring crops, equipment, and property.
3. Operational Costs
- Labor Costs: Wages for hired labor involved in planting, cultivating, and harvesting.
- Fuel Costs: Expenditure on fuel for tractors, irrigation pumps, and other machinery.
- Repairs and Maintenance: Costs associated with repairing and maintaining machinery and equipment.
4. Input Costs
- Energy Costs: Expenses related to the use of energy, such as electricity or fuel for various operations.
- Chemical Costs: Costs of chemicals and additives used in crop production.
- Technology Costs: Expenses for adopting new agricultural technologies or precision farming methods.
5. Interest Costs
- Interest on Loans: Interest payments on loans taken for agricultural purposes.
- Cost of Capital: Opportunity cost associated with using owned capital for farming activities.
6. Miscellaneous Costs
- Transportation Costs: Expenses related to transporting crops or livestock to markets.
- Marketing Costs: Costs associated with packaging, advertising, and selling agricultural products.
- Compliance Costs: Expenses related to meeting regulatory standards and compliance requirements.
Production costs that CACP Identifies
The Commission for Agricultural Costs and Prices (CACP) identifies three types of production costs for every crop:
1. ‘A2’ (Actual Paid-Out Costs)
This covers all the expenses farmers pay in cash or kind, like seeds, fertilizers, hired labor, and more.
2. ‘A2+FL’ (Actual Paid-Out Costs plus Imputed Value of Family Labor)
It includes A2 costs and adds an estimated value for the work done by the farmer’s family, considering the labor they contribute.
3. ‘C2’ (Comprehensive Cost)
This is a broader measure, including A2+FL. It accounts for additional factors like rentals and the interest the farmer would have earned if they didn’t use their own land and assets.
Why need MSP? – How MSP Helps Farmers?
There are many reasons why farmers need MSP. We have added those points below-
1. Price Stability
MSP provides farmers with a guaranteed minimum price for their crops, offering stability and protecting them from price fluctuations in the market.
2. Income Security
Farmers can rely on MSP to ensure a minimum income for their produce, reducing the financial risks associated with unpredictable market prices.
3. Risk Mitigation
MSP acts as a risk mitigation tool, shielding farmers from market uncertainties and adverse weather conditions that may affect crop prices.
4. Encourages Crop Diversification
By assuring a minimum price, MSP encourages farmers to diversify their crops instead of concentrating on high-yield but market-volatile crops, promoting agricultural diversity.
5. Incentive for Investment
MSP serves as an incentive for farmers to invest in modern agricultural practices, technology, and quality inputs, enhancing overall productivity and crop quality.
6. Social and Economic Stability
MSP contributes to social and economic stability in rural areas by preventing distress sales, reducing farmer indebtedness, and sustaining livelihoods dependent on agriculture.
7. Food Security
MSP plays a crucial role in ensuring food security by motivating farmers to produce staple crops, contributing to a stable and consistent food supply for the population.
How MSP Works?
MSP (Minimum Support Price) operates through a structured process to ensure farmers receive a fair price for their crops. Here’s how MSP works:
Step-1: Announcement
Before the sowing season, the government announces MSP for various crops based on recommendations from expert committees and considering factors like production costs, market trends, and farmers’ welfare.
Step-2: Crops Covered
MSP is generally applicable to major crops like rice, wheat, pulses, oilseeds, and cotton, among others. The list of crops covered may vary each season.
Step-3: Procurement Agencies
Government agencies, such as the Food Corporation of India (FCI) and State Agricultural Marketing Boards, are designated as procurement agencies. They are responsible for buying crops at MSP from farmers.
Step-4: Awareness Campaigns
The government conducts awareness campaigns to educate farmers about the MSP for different crops and the procurement process.
Step-5: Harvesting Season
During the harvesting season, farmers bring their produce to designated procurement centers. These centers are established in various locations to facilitate easy access for farmers.
Step-6: Verification and Weighing
Procurement agencies verify the quality of the produce and weigh it to determine the quantity. The quality parameters are set to ensure that only crops meeting specific standards are eligible for MSP.
Step-7: Payment to Farmers
Once the verification is complete, farmers are paid the MSP for their crops. Payment can be made through electronic means, checks, or direct bank transfers.
Step-8: Storage and Distribution
The procured crops are stored in government-operated warehouses. These crops can later be distributed through the public distribution system, ensuring a stable food supply and managing food prices.
Step-9: Market Intervention
In times of market fluctuations or when prices fall below the MSP, the government intervenes by procuring crops at the announced MSP to support farmers and stabilize prices.
Step-10: Review and Adjustments
The government periodically reviews MSP rates based on changing economic conditions, production costs, and market dynamics. Adjustments are made to reflect the evolving agricultural landscape.
What is APMC?
APMC stands for Agricultural Produce Market Committee. It is a statutory marketing board established by state governments in India. Here’s a breakdown of its key features:
1. Purpose
- Regulate the marketing of agricultural and horticultural produce in a specific area.
- Protect farmers’ interests by ensuring fair and competitive prices for their crops.
- Prevent exploitation by large retailers and middlemen.
2. Structure
- Each APMC operates within a defined market area.
- It is governed by a committee consisting of representatives of farmers, traders, and government officials.
- The committee oversees the functioning of the market, including:
- Licensing of traders and commission agents: Ensures fair practices and accountability.
- Market infrastructure: Provides facilities like weighing scales, storage spaces, and auction platforms.
- Market fees: Generates revenue for the APMC to maintain infrastructure and services.
3. Functionality
- APMCs typically operate physical markets (mandis) where farmers bring their produce to be auctioned to licensed traders.
- However, the system is evolving, and some APMCs now facilitate electronic trading platforms for more efficient transactions.
4. Current Status
- The role of APMCs is undergoing transformation due to:
- Growth of alternative marketing channels: Private mandis and direct marketing to consumers.
- Agricultural reforms: Aiming to improve market access and efficiency for farmers.
- Despite these changes, APMCs remain significant players in the Indian agricultural marketing system, especially for small and marginal farmers.
Impact on Public
The Minimum Support Price (MSP) system has several impacts on the public, influencing both consumers and the broader community:
1. Price Stability
MSP helps in stabilizing prices of essential commodities, ensuring that they do not fluctuate widely in the market. This stability benefits consumers by preventing abrupt and unpredictable increases in food prices.
2. Food Availability
MSP encourages farmers to produce staple crops by offering a guaranteed minimum price. This contributes to a steady and reliable supply of essential food items in the market, enhancing food availability for consumers.
3. Affordability
By providing a safety net for farmers, MSP helps maintain a balance between agricultural income and consumer affordability. Stable prices contribute to ensuring that essential food items remain reasonably priced for the public.
4. Social Welfare
MSP plays a role in social welfare by supporting farmers and rural communities. It helps prevent distress sales, reduce farmer indebtedness, and promote the overall well-being of the agricultural sector, which is crucial for the economy.
5. Reduced Food Insecurity
MSP contributes to reducing food insecurity by ensuring a steady supply of crops. This is particularly important during times of economic uncertainties or disruptions when a reliable food supply becomes vital for public well-being.
6. Employment Opportunities
A stable and well-supported agricultural sector, facilitated by MSP, can lead to increased employment opportunities in rural areas. This, in turn, helps in sustaining livelihoods and supporting the socio-economic development of the community.
7. Political Stability
MSP, being a crucial policy with implications on food security and rural prosperity, can contribute to political stability. Policies that support farmers often have political significance due to the large population dependent on agriculture.
8. Consumer Confidence
When consumers witness stable prices and a consistent supply of essential goods, it enhances their confidence in the economy. Predictable prices and availability contribute to a positive consumer sentiment.
9. Balanced Economic Growth
A robust agricultural sector, supported by MSP, contributes to balanced economic growth by ensuring that rural areas remain economically viable. This, in turn, can reduce disparities between urban and rural regions.
10. Environmental Impact
MSP can influence farming practices. Policies that encourage sustainable and environmentally friendly farming methods can have positive impacts on public health and the overall environment.
Role of Government in Providing MSP
The government plays a crucial role in providing Minimum Support Price (MSP) to support farmers and ensure the stability of the agricultural sector. Here are key aspects of the government’s role in implementing MSP:
1. Price Determination
The government, based on recommendations from expert committees and considering production costs, market trends, and farmers’ welfare, announces MSP for various crops before the sowing season.
2. Policy Formulation
The formulation of policies related to MSP is a responsibility of the government. These policies guide the implementation of MSP and address issues such as procurement mechanisms and support systems.
3. Awareness Campaigns
The government conducts awareness campaigns to educate farmers about MSP, its benefits, and the crops covered. This ensures that farmers are well-informed about the minimum prices set for their produce.
4. Procurement Infrastructure
The government establishes and maintains procurement infrastructure, including procurement centers and warehouses, to facilitate the buying of crops at MSP. Agencies like the Food Corporation of India (FCI) and State Agricultural Marketing Boards are often involved in this process.
5. Quality Assurance
Government agencies verify the quality of the crops brought by farmers to procurement centers. Strict quality standards are maintained to ensure that only crops meeting specific criteria are eligible for MSP.
6. Payment Mechanisms
The government ensures efficient and timely payment to farmers for their crops at MSP. Various payment methods, including electronic transfers and checks, are employed to facilitate prompt transactions.
7. Market Intervention
In situations where market prices fall below MSP, the government intervenes by procuring crops at the announced MSP. This market intervention supports farmers during periods of price volatility.
8. Review and Adjustment
Periodically, the government reviews MSP rates to account for changes in economic conditions, production costs, and market dynamics. Adjustments are made to keep MSP in line with the evolving agricultural landscape.
9. Policy Coordination
Coordination among various government departments and agencies is crucial for effective MSP implementation. This involves collaboration between the Ministry of Agriculture, state governments, and procurement agencies.
10. Social Welfare Initiatives
The government may introduce complementary social welfare initiatives alongside MSP, such as direct income support schemes, to further assist farmers and promote overall rural development.
11. Policy Adaptation
The government adapts MSP policies to address emerging challenges and incorporates feedback from farmers, experts, and stakeholders to enhance the effectiveness of the MSP system.
Significance of MSP
There are many significance of having MSP on few Crops –
1. Economic Backbone
Agriculture forms a significant part of the economy, contributing to GDP and providing livelihoods for a large population.
2. Food Security
Ensures a stable and consistent food supply, crucial for meeting the nutritional needs of the population.
3. Rural Livelihoods
Supports the livelihoods of millions in rural areas, reducing poverty and promoting socio-economic development.
4. Political Importance
The agricultural sector holds political significance, influencing policies and government decisions due to its impact on rural votes.
5. Market Stability
MSP contributes to market stability by preventing extreme price fluctuations in essential commodities.
6. Risk Mitigation
Provides a safety net for farmers, mitigating risks associated with market uncertainties and crop failures.
7. Agricultural Diversification
Encourages crop diversification by ensuring a minimum income, reducing dependence on a few high-yield but volatile crops.
8. Social Welfare
Showcases social welfare by preventing distress sales, reducing farmer indebtedness, and promoting overall well-being in rural communities.
9. Employment Opportunities
Supports employment generation, particularly in rural areas, contributing to overall economic growth.
10. National Stability
Maintains stability at the national level by ensuring the well-being of a significant portion of the population and securing the agricultural backbone of the economy.
Pros and Cons of MSP – Advantages and Disadvantages of MSP
We have enlisted the pros and cons of MSP in the table below-
Pros of MSP | Cons of MSP |
1. Price Stability: Ensures stable prices for agricultural produce, providing economic predictability. | 1. Market Distortions: May lead to market distortions and inefficiencies, as prices may not reflect actual supply-demand dynamics. |
2. Income Security: Offers a safety net for farmers, guaranteeing a minimum income for their crops. | 2. Cost Escalation: MSP policies can lead to cost escalation, especially if they do not align with market realities. |
3. Risk Mitigation: Helps farmers mitigate risks associated with market volatility and unpredictable weather. | 3. Resource Misallocation: May result in the misallocation of resources as farmers may focus on MSP-supported crops rather than more viable ones. |
4. Food Security: Contributes to national food security by ensuring a consistent supply of essential crops. | 4. Fiscal Burden: The financial burden on the government can be substantial, especially during times of surplus production. |
5. Rural Development: Promotes rural development by supporting livelihoods and infrastructure in rural areas. | 5. Inefficiencies in Procurement: The procurement process may suffer from inefficiencies, leading to delays and administrative challenges. |
6. Social Welfare: Contributes to social welfare by preventing distress sales and reducing farmer indebtedness. | 6. Regional Disparities: The benefits of MSP may not be evenly distributed, leading to regional disparities in its impact. |
Criticism of MSP in India
Criticism of Minimum Support Price (MSP) includes the following points:
1. Market Distortions
MSP can lead to market distortions by influencing prices that may not align with actual supply and demand dynamics. This can result in inefficiencies in resource allocation.
2. Cost Escalation
MSP policies, if not carefully managed, may contribute to cost escalation in agriculture. Farmers may increase production costs, expecting MSP to cover them, leading to inefficiencies.
3. Resource Misallocation
MSP may lead to the misallocation of resources as farmers might focus more on crops covered by MSP, even if other crops might be more viable or sustainable.
4. Fiscal Burden
The financial burden on the government can be substantial, especially during times of surplus production when the government needs to procure large quantities of crops at MSP.
5. Inefficiencies in Procurement
The procurement process under MSP can suffer from inefficiencies, delays, and administrative challenges, impacting the overall effectiveness of the support system.
6. Regional Disparities
Benefits from MSP may not be evenly distributed, leading to regional disparities. Some areas and farmers may benefit more than others, exacerbating existing economic inequalities.
7. Market Dependency
The reliance on MSP can make farmers overly dependent on government support, potentially hindering initiatives for market-driven agricultural reforms and innovations.
8. Environmental Concerns
The focus on certain high-yield crops promoted by MSP might contribute to environmental concerns, such as overuse of water and fertilizers, leading to soil degradation and water pollution.
9. Impact on Global Trade
In some cases, MSP policies may impact global trade dynamics by creating surpluses and affecting international prices, leading to trade disputes.
10. Resistance to Change
MSP, if not complemented with broader agricultural reforms, may create resistance to changes that could enhance the competitiveness and sustainability of the agricultural sector.
List of Crops Covered under MSP
Here’s a list of all crops covered under the Minimum Support Price (MSP) in India. The government announces MSPs twice a year, before the Kharif and Rabi sowing seasons.
Cereals
- Kharif: Paddy (common and grade ‘A’), Jowar, Bajra, Maize, Ragi
- Rabi: Wheat, Barley
Pulses
- Kharif: Tur (Arhar), Moong, Urad
- Rabi: Gram, Lentil (Masur)
Oilseeds
- Kharif: Groundnut, Sunflower Seed, Soybean (Yellow), Sesamum
- Rabi: Rapeseed/Mustard, Safflower Seed, Nigerseed
Commercial Crops
- Copra
- De-husked coconut
- Sugarcane (Fair and Remunerative Price (FRP))
- Raw Cotton
- Raw Jute
- Virginia flue cured (VFC) tobacco
Difference between Kharif Crops and Rabi Crops
We can understand the Difference between Kharif Crops and Rabi Crops by following points-
Aspect | Khareef / Kharif | Rabi |
Region | Primarily Oman, Dhofar region | South Asia (India, Pakistan, etc.) |
Meaning | Arabic for “autumn” or “monsoon” | Arabic for “spring” |
Timing | Summer months, typically June to September | Winter months, usually October to March |
When | June to September (Monsoon) | October to March (Winter) |
Weather | Rainy season, influenced by monsoon | Cool temperatures, winter crops |
Crops | Rice Maize Millets (Jowar, Bajra, Ragi) Cotton Sugarcane Groundnut Soybean Sunflower Turmeric Moong (Green Gram) Urad (Black Gram) Guar Sesame (Til) Jute Pearl Millet (Bajra) | Wheat Barley Mustard Chickpea (Gram) Lentil (Masoor) Peas Oats Linseed (Flaxseed) Rapeseed Safflower Fennel Coriander Garlic Onion Potato |
Climate Influence | Southwest monsoon winds, bringing rain to Dhofar region | Cool temperatures, influenced by northeast monsoons |
Geographical Focus | Dhofar region in Oman | Various regions in South Asia |
Crop Cultivation | Influences cultivation during monsoon for specific crops | Winter crops are sown during this season |
List of All Crops covered under MSP in India
These are the list of all Crops covered under MSP in India-
Commodity | Variety | MSP (Rs./quintal) in 2024 |
KHARIF CROPS | ||
PADDY | Common | 2183 |
PADDY | Grade ‘A’ | 2203 |
JOWAR | Hybrid | 3180 |
JOWAR | Maldandi | 3225 |
BAJRA | 2500 | |
MAIZE | 2090 | |
RAGI | 3846 | |
Tur (Arhar) | 7000 | |
MOONG | 8558 | |
URAD | 6950 | |
COTTON | Medium Staple | 6620 |
COTTON | Long Staple | 7020 |
Groundnut | 6377 | |
SUNFLOWER SEED | 6760 | |
SOYABEAN | Yellow | 4600 |
SESAMUM | 8635 | |
NIGERSEED | 7734 | |
RABI CROPS | ||
WHEAT | 2275 | |
BARLEY | 1850 | |
GRAM | 5440 | |
MASUR (LENTIL) | 6425 | |
Rapeseed & Mustard | 5650 | |
SAFFLOWER | 5800 | |
TORIA | 5450 | |
OTHER CROPS | ||
COPRA (Milling) | 10860 | |
COPRA (Ball) | 11750 | |
DE-HUSKED COCONUT | 2930 | |
JUTE | 5050 |
MSP Vs. MRP
Sometimes people mix the MSP with MRP. These are two different terms with completely different meanings. We have added the different between MSP & MRP in the table below-
Aspect | MSP (Minimum Support Price) | MRP (Maximum Retail Price) |
Definition | The lowest price set by the government to help farmers for certain crops. | The highest price at which a shop can sell a product to customers. |
Applicability | Mainly deals with farm products like grains and seeds. | Applies to things we buy, like food, electronics, and more. |
Regulation Authority | Regulated by the government’s Ministry of Agriculture. | Governed by consumer protection laws. |
Purpose | Helps farmers earn a fair income and keeps food prices stable. | Protects us from unfair prices and ensures fairness in shops. |
Commodities Covered | Includes crops like rice, wheat, and sugarcane. | Covers items we buy, from food to clothes and gadgets. |
Role in Economy | Keeps farming stable and ensures enough food. | Guards against unfair prices and supports fair competition in shops. |
Setting Mechanism | Decided by the government based on farming costs and market trends. | Set by sellers based on production costs and what people are willing to pay. |
Enforcement | Checked by government agencies and support systems. | Checked by consumer protection laws, with fines for violations. |
Role in Pricing | Affects wholesale prices of farm products. | Decides the highest price a shop can charge for things we buy. |
Focus Area | Primarily focuses on farming and food security. | Primarily focuses on making sure we’re treated fairly when we buy things. |
Examples | Examples include prices set for crops like rice and wheat. | Examples include the marked prices on things we see in shops. |
Key Facts about MSP UPSC
We have added more than 10 key facts about MSP in India below-
Point | Description |
Full Form | Minimum Support Price |
Meaning | A government-determined price at which it will buy certain agricultural products from farmers if the market price falls below that level. |
Definition | A market intervention by the Government of India to insure agricultural producers against sharp falls in farm prices. |
First Granted | 1966-67 |
Purpose | Protect farmers from distress sales and ensure a minimum income for their produce. |
Features | * Announced twice a year * Not mandatory procurement for all crops |
Function | Acts as a floor price for designated crops purchased by government agencies. |
Benefits | * Provides safety net for farmers * Encourages cultivation of essential crops * Helps maintain buffer stock of food grains |
Pros | Protects farmers from price fluctuations, promotes food security. |
Cons | Limited reach, potential market distortion, fiscal burden on government. |
Current Status | An ongoing debate exists due to its limitations and alternative support mechanisms are being explored. |
Kharif Crops with MSP | Paddy, Jowar, Bajra, Maize, Ragi, Tur (Arhar), Moong, Urad, Groundnut, Sunflower Seed, Soybean (Yellow), Sesamum, Copra, De-husked coconut. |
Rabi Crops with MSP | Wheat, Barley, Gram, Lentil (Masur), Rapeseed/Mustard, Safflower Seed, Nigerseed, Sugarcane (Fair and Remunerative Price (FRP)). |
FAQs on MSP – UPSC Questions on Minimum Support Price
Question-1: What does MSP stand for?
Answer. MSP stands for Minimum Support Price.
Question-2: What is MSP in simple terms?
Answer. MSP is a government-determined price at which it will buy certain agricultural products from farmers if the market price falls below that level. It acts as a safety net for farmers, ensuring they receive a minimum income for their produce even if market prices are low.
Question-3: What is the role of MSP?
Answer. MSP has the following roles:
- Protects farmers from distress sales.
- Encourages cultivation of essential crops.
- Helps maintain buffer stock of food grains.
Question-4: Who gives MSP?
Answer. The government of India announces MSPs, but it is not obligated to purchase all crops at those prices. Procurement primarily focuses on designated crops like wheat and paddy for maintaining food security.
Question-5: Why is MSP important in India?
Answer. MSP is important in India because it:
- Supports agriculture, a significant livelihood source.
- Ensures food security by incentivizing the production of essential crops.
- Contributes to livelihood security, reducing vulnerability to poverty.
Question-6: Who benefits from MSP?
Answer. Farmers cultivating designated crops covered under the MSP scheme benefit by receiving a guaranteed minimum price for their produce. Consumers also benefit from stable food prices.
Question-7: Who controls MSP in India?
Answer. The government of India ultimately decides on the MSPs for different crops. The Commission for Agricultural Costs and Prices (CACP) plays a crucial role in recommending MSPs.
Question-8: Who declares MSP in India?
Answer. The Cabinet Committee on Economic Affairs (CCEA), headed by the Prime Minister, officially declares the MSPs after considering recommendations from the CACP and other relevant factors.
Question-9: Why is MSP good?
Answer. MSP is good because it provides a safety net for farmers, encourages the cultivation of essential crops, and helps reduce price volatility, stabilizing market prices.
Question-10: Why is MSP bad?
Answer. Limited reach, fiscal burden on the government, and potential market distortion are drawbacks of MSP. It may not benefit all crops or farmers equally and can strain government finances.
Question-11: What is MSP and why is it important?
Answer. MSP is a government-determined minimum price for certain agricultural products. It is important as it provides a safety net for farmers and helps maintain food security in India.
Question-12: Is MSP good for farmers?
Answer. For farmers cultivating crops covered under MSP, it can be beneficial by providing a guaranteed minimum price. However, concerns about limited reach raise questions about its overall effectiveness for all farmers.
Question-13: What is the difference between MSP and MRP?
Answer. MSP is Minimum Support Price, a government-determined minimum price for buying certain agricultural products. MRP is Maximum Retail Price, the highest price at which a product can be sold to consumers, determined by the manufacturer.
Question-14: How many types of MSP are there?
Answer. There isn’t a specific classification of different “types” of MSP in India. The concept applies to various agricultural products, with specific MSPs varying depending on the crop.
Question-15: What is another name for MSP?
Answer. MSP does not have a commonly used alternative name. However, it can be referred to as a guaranteed minimum price or a floor price in the context of agricultural marketing.
Question-16: Who is the father of MSP?
Answer. There isn’t a single individual credited as the “father” of MSP in India. It was introduced as a government policy through a series of decisions.
Question-17: Is sugarcane under MSP?
Answer. Yes, sugarcane is covered under MSP. However, the government sets a Fair and Remunerative Price (FRP) for sugarcane, and it is not directly procured by government agencies like wheat and paddy.
Question-18: How MSP is decided in India?
Answer. The MSP determination process involves recommendations by the Commission for Agricultural Costs and Prices (CACP), government consideration, and a final decision by the Cabinet Committee on Economic Affairs (CCEA).
Question-19: How MSP is calculated?
Answer. The CACP uses a formula that considers components like A2 + FL (paid-out costs and imputed value of unpaid family labor) and C2 (comprehensive cost including rentals and interest forgone).
Question-20: What is the difference between MSP and MRP?
Answer. MSP is the minimum price guaranteed by the government for buying certain agricultural products, while MRP is the maximum retail price set by manufacturers for selling products to consumers.
Question-21: What are the 24 crops under MSP?
Answer. The list of crops covered under MSP can be found on the official website of the Department of Agriculture, Cooperation & Farmers Welfare.
Question-22: Is MSP given on rice?
Answer. Yes, MSP is announced for both paddy (unmilled rice) and rice.
Question-23: Is turmeric under MSP?
Answer. No, turmeric is not currently included in the list of crops covered under MSP.
Question-24: When is MSP announced?
Answer. The government generally announces MSPs twice a year: before the Kharif sowing season (around June) and before the Rabi sowing season (around October).
Question-25: How many products are under MSP?
Answer. There are 24 crops currently covered under the MSP scheme in India.
Question-26: How many farmers get MSP?
Answer. It is difficult to provide an exact number due to various factors and limitations of the system. The reach and effectiveness of MSP in impacting individual farmer income are complex and debated.
Question-27: What is the full form of APMC?
Answer. APMC stands for Agricultural Produce Market Committee.
Question-28: Is APMC good or bad?
Answer. APMCs have both benefits, regulating agricultural markets and preventing exploitation, and drawbacks, being bureaucratic and lacking transparency in some cases.
Question-29: What is the MSP of wheat in 2023-24?
Answer. The MSP for wheat in the 2023-24 crop year is ₹2,125 per quintal.
Question-30: Who calculates MSP?
Answer. The Commission for Agricultural Costs and Prices (CACP) calculates and recommends MSPs based on the cost of production and other factors.
Question-31: Is MSP declared by the government?
Answer. Yes, the government, specifically the Cabinet Committee on Economic Affairs (CCEA), ultimately declares the final MSPs after considering recommendations from the CACP and other relevant factors.
Question-32: What is MSP law?
Answer. Currently, there is no specific law in India that explicitly guarantees a Minimum Support Price (MSP) for all crops. The MSP system works based on recommendations, government decisions, and procurement focused on designated crops like wheat and paddy.