What is Minimum Support Price (MSP)
What is MSP
The minimum price at which which Government will buy crop from farmer. This is meant to serve as “floor” price, below which Government will not allow prices to fall, EVEN If there was bumper crop.
On the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP), Government of India declares minimum support prices before each sowing season for certain crops. Government agencies purchase the entire quantity offered by the farmers at the announced minimum price. Thus, farmer always has the option to sell produce to government, if he can’t get remunerative prices from private merchants.
How MSP save farmers
- Prevents Forces sale
- National Bank for Agriculture & Rural Development’s (NABARD)‘s’ All India Rural Financial Inclusion Survey 2016-17 found that the average monthly income of an agriculture household is less Rs.9,000/- from all sources combined (cultivation, wage labour, animal husbandry.)
- Thus, farmer rarely has surplus savings for buying inputs for the next cropping season. Access to credit (loans) is also difficult for small and marginal farmers.
- So, if they are forced into distress-sale of produce at throw-away prices, they’ll not be able to buy high quality seeds, fertilizers, pesticides & tractor-rent for next cropping season, which will further decrease their income from the next cycle. MSP prevents this phenomenon.
- Informed Decision
- Government announces MSP before the sowing season for 23 crops including cereals, pulses, oilseeds & certain cash crops.
- This advance information helps the farmer to make an informed decision about which crop to sow for maximum economic benefit within the limitations of his farm size, climate and irrigation facilities.
- Limitation for private buyers
- MSP sends a price-signal to market that if merchants don’t offer higher than MSP prices the farmer may not sell them his produce.
- Thus it acts as an anchor or benchmark for agro-commodity market. While it doesn’t guarantee that market prices will also be higher than MSP, but atleast it ensures the market prices will not drastically lower than MSP. [e.g. IF Mandi-cartel-mafias offers wheat purchase price at 90% lower than MSP, then their political masters from ruling party will put pressure on them lest the media and opposition parties make an issue of it!]
How MSP decieded
- Commission for Agricultural Costs and Prices (CACP) since ’85.
- Under Agriculture ministry (and NOT consumer affairs ministry). CACP Has two non-official members from farming community.
- CACP recommends minimum support prices (MSP) based on certain economic criteria.
- Subsequently, the center announces MSPs for 24 major agricultural commodities, including sugarcane, before each season.
- MSP announced for both RABI and Kharif SEASONS.
Season wise crops (Kharif, Rabi and Zaid)
| Season | North India | South India |
|---|---|---|
| Kharif: June to Sept | Rice, Cotton, Bajra, Maize, Jowar, Tur | Rice, Maize, Ragi, Jowar, Groundnut |
| Rabi: Oct to March | Wheat, Gram, Rapeseeds and Mustard, Barley | Rice, Maize, Ragi, Groundnut, Jowar |
| Zaid: April-June | Vegetables, Fruits, Fodder | Rice, Vegetables, Fodder |
