MSP: Full Form, Crop List, Importance, Issues, MSP UPSC
By BYJU'S Exam Prep
Updated on: November 14th, 2023
MSP stands for Minimum Support Price, which is a government-set price for farmers who find a viable crop. The Indian government intervenes in the market to shield farmers from price drops that cause them to lose a considerable amount of money. MSP is the lowest price set by the government of India for certain agricultural products, at which the farmers can sell their products to the government directly. MSP is announced at the beginning of the sowing season by the government of India.
MSP is critical to our economy as it has played an important role in supporting the livelihoods of millions of farmers across the country. In this article, we have covered need, significance, crop list, and issues with the Minimum Support Price. UPSC aspirants need to cover this topic comprehensively as it is a major topic of the economics section.
Table of content
What is MSP?
MSP full form is Minimum Support Price. Agriculture in India contributes significantly to its economy, and that’s why the government must prioritize the protection of our farmers. This was the only reason why the Government of India introduced the MSP. 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 UPSC Notes
MSP is a sort of guaranteed 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 and 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 a 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 economic growth 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
The Minimum Support Price (MSP) is an important topic in the UPSC economics syllabus, particularly in the context of India’s agricultural sector. The MSP system is a key policy tool used by the Indian government to ensure that farmers receive a fair price for their crops, and has been a subject of much debate and discussion in recent years. UPSC aspirants are expected to have a good understanding of the MSP system, its historical and contemporary significance, and its impact on farmers, the agricultural sector, and the wider economy. A sound understanding of the MSP system is therefore essential for UPSC aspirants who wish to excel in the General Studies paper, as well as in the Essay and UPSC Optional Subjects related to agriculture, economics, and governance.
MSP UPSC Questions
Question: What is Minimum Support Price (MSP)? a) The minimum price at which the government purchases crops from farmers b) The maximum price at which the government purchases crops from farmers c) The price at which the government sells crops to consumers d) The price at which farmers sell their crops in the open market
Answer: (a) The minimum price at which the government purchases crops from farmers
Question: Who sets the Minimum Support Price (MSP)?
a) Ministry of Agriculture and Farmers Welfare b) Ministry of Commerce and Industry c) Ministry of Home Affairs d) Ministry of Finance
Answer: (a) Ministry of Agriculture and Farmers Welfare
Question: Which of the following crops does not come under the MSP system in India? a) Rice b) Wheat c) Maize d) Fruits and Vegetables
Answer: (d) Fruits and Vegetables
Question: MSP is announced by the government every year for which of the following crops? a) Kharif crops b) Rabi crops c) Both Kharif and Rabi crops d) Horticulture crops
Answer: (c) Both Kharif and Rabi crops
