What is Minimum Support Price (MSP)? Who will calculate it ? How it has been calculated?

Hi we all know that when the demand for a product is less and if we have more supply of that products in the market, naturally the value of the product will be less and the producer will get very less price and he will be in loss. Similar things will happen agriculture when bumper harvesting will take place for the products. To protect farmers from the excessive price fall during bumper harvesting time. Farmers were protesting over the written assurance of the MSP for the crops in the new farm bill .So in this blog we gone study the details about it.

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Highlights:

* What is MSP? : Why the MSP is important to the farmers?

* Who will calculate and recommend the MSPs and how it has been calculated?

* Impact of the farm bills on MSP and PDS system?

Minimum Support Prices (MSP):

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When there is sharp fall in farm prices for the produce the Govt. of India will come to the rescue of the farmers against the fall in price. It will buy/procure the products at pre-determined prices known as minimum support prices (MSPs) by the farmers through different government procurement agencies. Govt. of India announces the MSP for the selected crops at the beginning of the sowing season both for Kharif and Rabi seasons on the recommendations of Commission for Agricultural Costs and Prices (CACP). The MSP rates will vary every year depending upon many factors.

Crops covered under MSP programme:

The list of crops covered under MSP programme will go on updating from time to time. At present CACP recommends MSPs for 23 crops /commodities comprises of:

* Cereals (7): Paddy, Wheat, Maize, Sorghum, Pearl millet, Barley and Ragi

* Pulses (5): Gram, Tur, Moong, Urad and Lentil

* Oli seeds (7): Groundnut, Rapeseed- Mustard, Soyabean, Seasmum, Sunflower, Safflower and Niger seed

*Commercial crops (4): Copra, Sugarcane, Cotton and Raw jute.

Note: In case of sugarcane the MSPs were called as Fair Remunerative Prices (FRPs).

Importance of MSPs to the farmers:

* MSPs are the minimum support prices are a guarantee prices for their produce from the government.

* These are the minimum guaranteed prices are fixed to set a floor below which market prices cannot fall.

*MSP is price fixed by government to protect the producer – farmers against excessive fall in price during bumper production years or during glut in the market.

* Overall the major objectives are to support the farmers from distress sales and to procure food grains for public distribution purpose.

Who will calculate and recommends the MSPs?

The Commission for Agricultural Costs and Prices (CACP) office working under the Ministry of Agriculture and farmer’s welfare, GOI. Is the main agency responsible for calculating and recommending the MSP to the government after consulting the agencies involved in procurement and distribution of the commodities. Every year CACP submit its recommendation to the govt. in the form of Price Policy report for the crops covered under MSP programme. The CACPs reports were circulated to the state governments and concerned central ministries for their feedbacks and after that finally Cabinet Committee on Economic Affairs (CCEA) will finalize the level of MSPs recommended by the CACP.

How the MSPs were calculated?

For calculating the MSPs for the crops the CACP will consider the following terms:

1. Demand and Supply for the commodity

2. Cost of production for the crops

3. Price trends for the crops in domestic and international markets

4. Inter-crop price disparity

5. Terms of trade between agriculture and non-agriculture

6. A minimum of 50 percent as the margin over cost of production.

7. Implications of MSP on the consumers of that product

The cost of production is an important factor that goes as an input in determination of MSPs to the crops. By taking all the factors in to consideration the MSP levels were determined.

Impact of Farm Bills on MSPs and on Public Distribution System (Sarkari Ration):

Government purchases the commodities during the bumper harvesting or glut season at the predetermined MSP rate against the excessive price fall. The procurement was mainly done through the APMC mandies and through the government procurement agencies like Food Corporation of India (FCI), NAFED, Cotton Corporation, Jute Corporation and other agencies. The major portion of FCI procurement was utilized in order to maintain buffer stocks and into the public distribution system.

As in the Farmers Trade and Commerce government said that farmers are free sale their produce outside the APMC yard and allowing Private markets will have the negative impact on the procurement of commodities by the APMC and if farmers sale their products  outside APMC their will not be any price assurance by the private entities. Due to the new bill the APMCs will become weak. There is no mention of continuation of MSP in the written form. Because of procurement problem and hoarding /stocks by private traders the price of the essential commodities will become high and they will be available at the higher prices at ration shops.

So government should think again over liberalizing the private entities to operate in the mandies which will give completion to the government regulated mandies .The commodities procured by these private entities will be available to the consumers at higher prices. Similarly the removing stock limits of private traders over essential commodities will also had the adverse effect on consumers.

Finally the Producers (Farmers) and consumers will suffer from these bills.

(Content Source:cacp.dacnet.nic.in)