MINIMUM SUPPORT PRICE (MSP) (Syllabus: GS Paper 3 – Economy)

Context: The Union Cabinet, recently chaired by the Prime Minister at the start of his third term, approved raising minimum support prices (MSPs) for kharif crops, setting them at a minimum of 1.5 times the production cost to ensure farmers receive 50% returns.

Minimum Support Price (MSP)

• About: MSP serves as a government-established rate at which crops are bought from farmers, providing them with protection against significant declines in agricultural prices.
• Announced by: The Commission for Agricultural Costs & Prices (CACP) recommends MSPs for 22 mandated crops and Fair and Remunerative Prices (FRP) for sugarcane.
• Origin of Concept: MSP was initially introduced in 1966, drawing inspiration from the Green Revolution.
• Crops covered: 7 types of cereals (paddy, wheat, maize, bajra, jowar, ragi and barley)

o5 types of pulses (chana, arhar/tur, urad, moong and masoor)

o7 oilseeds (rapeseed-mustard, groundnut, soybean, sunflower, sesamum, safflower, niger seed)

o4 commercial crops (cotton, sugarcane, copra, raw jute).

• Factors for Recommending the MSP: Demand and supply, Cost of production, 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 percent as the margin over the cost of production, Implications of MSP on consumers of that product.
• Recommendation of Swaminathan Committee regarding MSP

oTo fix minimum support prices (MSP) for crops at least 50% more than the weighted average cost of production.

oGovt. has announced its decision to ensure that farmers receive MSP = 1.5 times of production cost.