MINIMUM SUPPORT PRICE

Subject: Economy (agri)

Context:

PM says that minimum support price (MSP) and government procurement are important part of food security in India.

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