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Minimum Support Price (MSP)

Topics covered:

  1. Issues related to direct and indirect farm subsidies and minimum support prices.

 

Minimum Support Price (MSP)

 

What to Study?

For prelims: what is MSP, crops covered and other related facts.

For mains: issues related to MSP and the need for reforms.

 

Context: Haryana government is planning to discourage planting of the water-guzzling rice (paddy) crop, which threatens to deplete the State’s groundwater. Meanwhile,  farmers have asked the government to first come out with a mechanism to procure alternative crops at the Minimum Support Price (MSP) so that farmers are not at the receiving end.

 

What necessitated  This?

Water depletion in Haryana over the years has led to 60 dark zones in the State, which include 21 critical ones in 10 districts.

 

Challenges:

  • The government wants to save water but it seems to be unaware of the ground realities.
  • If the government wants farmers to give up rice and cultivate some other crop then there needs to be a mechanism to purchase the alternative crop at MSP.
  • The State government should enact a law, which guarantees that the produce of farmer is purchased at MSP .
  • Farmers will only leave rice cultivation if they are sure of reaping more profit with the alternative crop (maize and tuar), which the government is suggesting.

 

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: the Hindu.