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Understanding India’s Minimum Support Price (MSP) System

Historical Perspective of MSP:

The Minimum Support Price (MSP) system in India has its roots in the post-independence era when the country faced severe food shortages and the need to incentivize agricultural production was paramount. The Green Revolution of the 1960s, which aimed to increase agricultural productivity through the adoption of high-yielding varieties of seeds, irrigation, and fertilizers, further underscored the importance of price stability for farmers.

The concept of MSP was first introduced in the 1960s to provide a safety net to farmers by guaranteeing them a minimum price for their produce. Initially, MSP was focused on wheat and rice, the two major staple crops in India. Over the years, the scope of MSP has expanded to include a variety of crops to ensure food security and support agricultural diversity.

 

Determination of MSP:

The determination of MSP is a complex process that involves various factors such as input costs, demand-supply dynamics, international prices, and the cost of production. The Commission for Agricultural Costs and Prices (CACP), an autonomous body under the Ministry of Agriculture and Farmers’ Welfare, plays a crucial role in recommending MSPs for different crops.

The CACP takes into account factors like cost of cultivation, production expenses, market prices, demand-supply situation, and price trends in domestic and international markets while formulating MSP recommendations. The recommendations are then reviewed by the Cabinet Committee on Economic Affairs (CCEA) before being approved and announced by the government.

Pricing Policy for Sugarcane:

Sugarcane is a vital cash crop in India, and its pricing is governed by a unique system called the Fair and Remunerative Price (FRP). The FRP is determined based on the recommendations of the Commission for Agricultural Costs and Prices (CACP) and is announced by the government before the start of the crushing season.

In addition to the FRP, state governments also have the authority to announce a State Advised Price (SAP) for sugarcane, which is often higher than the FRP. The SAP acts as a floor price, ensuring that farmers receive a fair return for their produce.

Crops Covered:

The MSP system covers a wide range of crops, including cereals (such as rice, wheat, and maize), pulses (such as chickpeas, lentils, and pigeon peas), oilseeds (such as soybeans, groundnuts, and mustard), and commercial crops (such as cotton and sugarcane). The government periodically reviews the list of crops eligible for MSP based on factors like demand-supply dynamics, price stability, and farmers’ welfare.

Latest Minimum Support Prices:

For the Kharif marketing season of 2023-24, the government announced MSPs for various crops, including paddy, maize, millets, and pulses. Similarly, for the Rabi marketing season of 2024-25, MSPs were announced for crops like wheat, barley, gram, and mustard.

The MSPs for different crops are periodically revised by the government to ensure that farmers receive remunerative prices for their produce and to address any imbalances in the agricultural market.

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