Minimum Support Price (MSP) is a kind of guarantee of a minimum price for the agricultural produce in India to purchase directly from the farmer. The price of msp is set and announced by Government of India at the beginning of the sowing season for certain in the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) crops to protect the producers i.e. farmers.
Reason behind the idea of MSP is to counter price volatility of agricultural commodities due to the factors like variation in their supply, lack of market integration.
The CACP is an attached office of the Ministry of Agriculture and Farmers Welfare, formed in 1965. It is a statutory body that submits separate reports recommending prices for Kharif and Rabi seasons.
The Commission for Agricultural Costs and Prices (CACP) takes into account several factors while deciding the MSPs of Rabi and Kharif crops. These factors are;
1. A minimum of 50% as the margin over the cost of production.
2. Demand and supply.
3. Changes in input prices.
4. Input-output price parity.
5. Effect on the cost of living.
6. Effect on the general price level.
7. Trends in market prices.
8. Parity between prices paid and prices received by the farmers.
9. International price situation.
The minimum support price of 22 crops is declared by the the ‘Department of Agriculture and Co-operation, Government of India on the recommendations of CACP’.
The list of crops are as follows-
- Cereals (7) – paddy, wheat, barley, jowar, bajra, maize and ragi
- Pulses (5) – gram, arhar/tur, moong, urad and lentil
- Oilseeds (8) – groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed
- Raw cotton
- Raw jute
- De-husked coconut
- Sugarcane (Fair and remunerative price)
- Virginia flu cured (VFC) tobacco
The Minimum Support Prices for all mandated crops is increased by the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Shri Narendra Modi on June 1, 2020.
MSP comes out to be major relief for farmers in case of distress sale and procure food grains for public distribution.