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

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.