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

News-CRUX-10     20th December 2023        

Context: Paddy procurement under the minimum support price (MSP) scheme declined 13% on year to 36.54 million tonne (MT) so far in the current season.

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.
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