What is MSP?
MSP full form is Minimum Support Price. Given that India is an agricultural country, the government must prioritize the protection of our farmers. This was the only reason why the Government of India introduced MSP.
>> MSP UPSC
- Minimum Support Price in the year 1966-67 to protect the farmers from such worries. The minimum support price depends on the bumper production and is set for 24 commodities as such by the government of India twice a year.
- It is nothing but the price fixed by the Government of India to safeguard the rights of farmers in case the prices fall extremely when the production is at its peak.
- MSP is a sort of guarantee price that the farmers would be getting no matter whether the conditions relate to distress sales so that they can procure the necessary food grains.
- Before the sowing season of the crops, especially for 22 crops, it is the duty of the Department of Agriculture and Cooperation under GoI to decide the MSP as per the recommendations of the Commission for Agricultural Costs and Prices.
MSP Crops List
The CACP (Commission for Agricultural Costs & Prices) recommends MSP for 22 mandated crops.
- The mandated crops contain 14 Kharif crops, 6 Rabi crops, and two other commercial crops.
- For sugarcane, FRP is declared by the Department of Food & Public Distribution.
- Twenty-two crops covered under MSP are Paddy, Bajra, Jowar, Maize, Arhar, Ragi, Moong, Groundnut-in-shell, Urad, Soyabean, Nigerseed, Sunflower, Sesamum, Cotton, Barley, Wheat, Gram, Rapeseed/Mustardseed, Masur (lentil), Jute, Copra and Safflower.
- The MSP for Toria and De-Husked coconut is fixed by the Department based on MSPs of Rapeseed/Mustardseed and Copra, respectively.
History of Minimum Support Price(MSP)
The Green Revolution was behind the concept of MSP, which began in 1966. It is the government that takes care of the Minimum Support Price to keep a check on major agricultural commodities each year, including both the Kharif crops as well as the rabi crops equally.
- MSP is a kind of insurance provided to the farmers by the government in case some change in the prices might affect them directly and further production. This way, the market prices cannot go below the fixed price, providing the best to the farmers in most circumstances.
- The concept of MSP by the government has its origin in the rationing system that was introduced long back during World War II by the British to give the best possible advantages to the farmers.
Features of MSP
MSP is the form of government intervention in the form of a minimum price for crops to the farmers to safeguard their basic interests and keep them in the field only.
- In case none of the traders come forward to buy the agricultural produce at the given MSP, then it becomes the duty of the Food Corporation of India to go ahead with the same and support the farmers as much as they can.
- Under MSP, farmers are not allowed to sell their produce at higher prices than the ones decided by the government for their crops as such.
- They can only do so in case the traders are willing to buy the agricultural produce at a higher rate to avoid wastage and any kind of losses.
Significance of MSP
With the growing economy and globalization leading to agricultural commodities being sold freely in the market, it is quintessential to protect the rights of the farmers and provide them with a guaranteed price for their produce.
- MSP takes care of price fluctuations that have a direct effect on the farmers and their products, along with market imperfections, as rising and falling prices make the market work accordingly.
- When the farmers are fully assured about the guaranteed price or MSP for their crops with assured markets to sell their produce, they are always keen to make higher investments with the benefit of getting higher returns.
- Once all this is set, they get encouraged to adopt modern farming practices to make their work simpler, easier, and more productive.
Issues with Minimum Support Price(MSP)
MSP is accessible to farmers but not as an entitlement. They are not in a position to demand legally or as part of their right as it all depends on the government.
- Though MSP is announced every year by default, it is a well-known fact that it does not increase in the same proportion as the cost of production. This means the cost of production keeps increasing every year while MSP remains at a stagnant rate.
- Since most of the farmers are illiterate and don’t possess sufficient knowledge about their rights related to MSP, hence the middlemen always exploit them and don’t give them their share as stated.
Determinants Of MSP
While recommending the price policy of various commodities under its mandate, the Commission keeps in mind the various Terms of Reference (ToR) given to CACP in 2009. Accordingly, it analyzes
- 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; and
- Likely implications of MSP on consumers of that product.
It may be noted that the cost of production is an important factor that goes as an input in the determination of MSP, but it is certainly not the only factor that determines MSP.
MSP UPSC is an important topic for the students preparing for UPSC Prelims and UPSC Mains. In addition, those who have opted for an optional economics subject must emphasize this topic. Here we have added all crucial information on MSP from the UPSC Exam point of view. Candidates should go through the notes thoroughly to build a solid foundation on MSP. Candidates should also glance through the UPSC Previous Year Question Papers to find out the types of questions asked in the UPSC exam on this particular topic.
MSP UPSC Questions
Question: Consider the following statements:
- In the case of all cereals, pulses, and oil seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
- In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.
Which of the statements given above is/are correct?
- A) 1 Only
- B) 2 only
- C) Both 1 and 2
- D) Neither 1 nor 2
Answer- Option D- Neither 1 nor 2
Other Important UPSC Notes