MINIMUM SUPPORT PRICE

Subject: Economy(agri)

Context:

Union Finance Minister Nirmala Sitharaman has reiterated that the minimum support price (MSP) for crops will continue and will not be withdrawn.

Concept:

Fixation of MSP

• The MSP is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP).
• Factors taken into consideration for fixing MSP include:
  • Demand and supply;
  • Cost of production (A2 + FL method)
  • Price trends in the market, both domestic and international;
  • Inter-crop price parity;
  • Terms of trade between agriculture and non-agriculture;
  • A minimum of 50% as the margin over cost of production; and
  • Likely implications of MSP on consumers of that product.
• The Commission also makes visits to states for on-the-spot assessment of the various constraints that farmers face in marketing their produce, or even raising the productivity levels of their crops.
• Based on all these inputs, the Commission then finalizes its recommendations/reports, which are then submitted to the government.
• The government, in turn, circulates the CACP reports to state governments and concerned Central Ministries for their comments.
• After receiving the feed-back from them, the Cabinet Committee on Economic Affairs (CCEA) of the Union government takes a final decision on the level of MSPs and other recommendations made by the CACP.
• Procurement: The Food Corporation of India (FCI), the nodal central agency of the Government of India, along with other State Agencies undertakes procurement of crops.
• Government fixes MSP for 22 mandated crops which are paddy, jowar, bajra, maize, ragi, arhar, moong, urad, groundnut-in-shell, soyabean, sunflower, sesamum, nigerseed, cotton, wheat, barley, gram, masur (lentil), rapeseed / mustard, safflower, jute and copra. In addition, MSP of Toria and de-husked coconut are also fixed on the basis of the MSPs of rapeseed/mustard and copra respectively