Minimum Support Prices (MSPs)

 Giving a major enhance for the farmers’ income, the Cabinet Committee on Economic Affairs has sanctioned the increase in the Minimum Support Prices (MSPs) for all kharif crops for 2018-19 Season.

What is it?

  • In theory, an MSP is the minimum price set by the Government at which farmers can expect to sell their produce for the season. When market prices fall below the announced MSPs, procurement agencies step in to procure the crop and ‘support’ the prices.

Who announces?

The Cabinet Committee of Economic Affairs announces MSP for various crops at the beginning of each sowing season based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). The CACP takes into account demand and supply, the cost of production and price trends in the market among other things when fixing MSPs.

Why is it important?

Price volatility makes life difficult for farmers. Though prices of agri commodities may soar while in short supply, during years of bumper production, prices of the very same commodities plummet. MSPs ensure that farmers get a minimum price for their produce in adverse markets. MSPs have also been used as a tool by the Government to incentivise farmers to grow crops that are in short supply.

Way ahead:

Trends in MSP impact the availability of key food crops and food inflation. MSP is also good tool to ensure that farmers produce what is most lucrative for them, given consumer demand.

However, in recent years, there have been large-scale imports of pulses and oil seeds into India with high costs adding to Consumer Price inflation. Unless the Centre increases State procurement of these crops, the bias towards rice, wheat and sugarcane (where minimum prices are fixed by States) may continue. Pulses are a cheap source of protein for the masses.

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