MINIMUM SELLING PRICE

MINIMUM SELLING PRICE

TOPIC: Agriculture

Context- MSPs provide a floor for market prices, and ensure that farmers receive a certain “minimum” remuneration so that their costs of cultivation (and some profit) can be recovered.

Concept-

Minimum Support Price (MSP):

• Minimum Support Price (MSP) is the minimum price set by the government for certain agricultural products, at which the products would directly be bought from the farmers if the open market prices are less than the cost incurred.
• MSPs provide a floor for market prices, and ensure that farmers receive a certain “minimum” remuneration so that their costs of cultivation (and some profit) can be recovered.

Crops covered by MSPs include:

• 7 types of cereals (paddy, wheat, maize, bajra, jowar, ragi and barley),
• 5 types of pulses (chana, arhar/tur, urad, moong and masur),
• 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower, nigerseed),
• 4 commercial crops (cotton, sugarcane, copra, raw jute)

Who decides what the MSP?

• The MSPs are announced by the Union government based on the recommendations of the Commission for Agricultural Costs and Prices (CACP).
• While recommending MSPs, the CACP looks at the following factors:
  • the demand and supply of a commodity;
  • its cost of production;
  • the market price trends (both domestic and international);
  • inter-crop price parity;
  • the terms of trade between agriculture and non-agriculture (that is, the ratio of prices of farm inputs and farm outputs);
  • a minimum of 50 per cent as the margin over the cost of production; and
  • the likely implications of an MSP on consumers of that product.
• The government does not procure all farm produce at MSPs. Actual procurement (at MSP) varies with crop and geography. Also, MSPs have no statutory backing.