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Minimum Support Prices (MSPs)

Topics covered:

  1. Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes.
  2. Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing.

 

Minimum Support Prices (MSPs)

 

What to study?

  • For Prelims: MSP- crops covered, how is it decided.
  • For Mains: MSP- need, significance, concerns and rectifying measures.

 

Context: The Union government has declared inclusion of 17 new minor forest produce (MFP) under the government’s minimum support price scheme.

  • The new MFP under the scheme includes Mahua flowers (dried), Tejpatta (dried) and Kokum (dry).

 

Background:

The Pricing Cell, constituted by the Tribal Cooperative Marketing Development Federation of India Ltd (TRIFED), recommended inclusion of new MFPs under the scheme, given their importance to the economy of local communities.

 

Significance:

A Planning Commission report had noted that MFP contributes to 20 to 40 per cent of the income of forest-dependent communities, especially the landless with a dominant population of tribals, and “provides critical subsistence during lean seasons.”

  • The MFP economy, however, is also known to suffer from unorganised and uncertain market demands, affecting economic returns to these communities.

 

About MSP:

What is it?

In theory, an MSP is the minimum price set by the Government at which farmers can expect to sell their produce for the season. When market prices fall below the announced MSPs, procurement agencies step in to procure the crop and ‘support’ the prices.

 

Who announces?

The Cabinet Committee of Economic Affairs announces MSP for various crops at the beginning of each sowing season based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). The CACP takes into account demand and supply, the cost of production and price trends in the market among other things when fixing MSPs.

 

Why is it important?

Price volatility makes life difficult for farmers. Though prices of agri commodities may soar while in short supply, during years of bumper production, prices of the very same commodities plummet. MSPs ensure that farmers get a minimum price for their produce in adverse markets. MSPs have also been used as a tool by the Government to incentivise farmers to grow crops that are in short supply.

 

Sources: Down to Earth.

Mains Question: Will a rise in the minimum support price (MSP) solve the problem of farm distress? Critically examine.