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Minimum Support Price (MSP) for Farmers

Minimum Support Price (MSP) for Farmers

Context:

The recently enacted law that dismantles the monopoly of APMC (agricultural produce market committee) mandis may not have faced serious farmer opposition had it included a provision safeguarding the continuance of the existing minimum support price (MSP)-based procurement regime.

What does the law say about MSP?

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill does not give any statutory backing to MSP. There isn’t even a mention of either “MSP” or “procurement” in the Bill passed by both Houses of Parliament.
  • Recently, the protest by farmers over the three farm bills has a direct connection with the Minimum Support Price - Public Distribution System (MSP-PDS) regime.

Minimum Support Price (MSP):

  • MSP is a “minimum price” for any crop that the government considers as remunerative for farmers.
  • It is also the price that government agencies pay whenever they procure the particular crop.
  • The Centre currently fixes MSPs for 23 farm commodities i.e.:
    • 7 cereals: paddy, wheat, maize, bajra, jowar, ragi and barley
    • 5 pulses: chana, arhar/tur, urad, moong and masur
    • 7 oilseeds: rapeseed-mustard, groundnut, soya bean, sunflower, sesamum, safflower and nigerseed
    • 4 commercial crops: cotton, sugarcane, copra and raw jute.
  • The centre is not legally bound to pay the MSPs even if the open market rates for the said produce are ruling below their announced floor prices.

Announcement:

  • MSP is announced at the beginning of the sowing season for certain crops on recommendations by Commission for Agricultural Costs and Prices(CACP) and announced by Cabinet Committee on Economic Affairs (CCEA) chaired by the PM of India.

How are MSPs determined?

  • The Centre fixes MSPs for every Kharif and Rabi season based on the recommendations of the Commission of Agricultural Costs and Prices (CACP).
  • While calculating the Minimum Support Prices (MSPs), the CACP consider the following costs:
    • A2: Covers all cash and in-kind expenses incurred by farmers on seeds, fertilizers, chemicals, hired labour, fuel, irrigation etc.;
    • FL: Actual costs plus an imputed value of unpaid family labour; and
    • C2: Includes A2+FL along with revenues forgone on owned land (rent) and fixed capital assets (interests).

Source: Indian Express