Minimum Support Price
Minimum Support Price or MSP is the price at which government procures various crops from the farmers with the primary objectives of protecting the farmers from distress sales and to procure essential food grain for public distribution. Minimum Support Price is a form of market intervention the Government makes towards supporting farmers against any steep decline in farm prices. Based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), Government announces MSP at the beginning of the sowing season for select agricultural crops. In the event of market prices falling below the MSP for a commodity, Government agencies buy the entire stock from the farmers at MSP.
Government announces MSPs for 22 mandated crops and fair and remunerative price (FRP) for sugarcane on the basis of recommendations of the Commission for Agricultural Costs and Prices (CACP), after considering the views of State Governments and Central Ministries/Departments concerned and other relevant factors.
The mandated crops are 14 crops of the kharif season viz. paddy, jowar, bajra, maize, ragi, arhar, moong, urad, groundnut-in-shell, soyabean, sunflower, sesamum, nigerseed and cotton; 6 rabi crops viz. wheat, barley, gram, masur(lentil), rapeseed/mustard and safflower and two other commercial crops viz. jute and copra. In addition, the MSPs of toria and de-husked coconut are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively.
While Government offers procurement of the mandated crops at MSP, farmers are free to sell their produce either to government procurement agencies or in the open market, as may be advantageous to them.
MSP Hike for Kharif and Rabi Crops
In the Union Budget for 2018-19, Government announced to fix MSP at a level of at least 150 per cent of the All-India weighted average Cost of Production.
The announcement is in line with the recommendation of the National Commission for Farmers, constituted under the chairmanship of agricultural scientist MS Swaminathan. The Commission recommended that farmers should be given MSP under the C2+50 percent formula. That formula implies that the MSP should cover the total cost of the crop (C2) and the profit of 50 percent.
Cost of production varies in different states on account of difference in levels of irrigation, resource endowment, farm mechanization, land holding size, yield of crops etc. Increase in MSP at a level of at least 150 per cent of the cost of production will ensure remunerative price to farmers. By ensuring a return of 50 per cent over all India weighted average cost of production, farmers in states/regions with relative lower returns would also be able to have higher margins than earlier.
For the 2022-23 marking season, the Government has increased the MSPs for all mandated Rabi and Kharif crops. The highest increase in MSP among the Ravi crops has been announced for Lentil and Rapeseed/ Mustard (Rs. 400 per quintal each) followed by Gram (Rs. 130 per quintal) and Safflower (Rs. 114 per quintal). For Wheat and Barley, an increase of Rs. 40 per quintal and Rs 35 per quintal respectively has been announced.
Among the Kharif crops, the highest absolute increase in MSP over the previous year has been recommended for Sesamum (Rs. 523 per quintal) followed by Moong (Rs. 480 per quintal) and Sunflower Seed (Rs. 385 per quintal). In case of Nigerseed and Cotton (Long Staple), there has been an increase of Rs. 357 per quintal and Rs. 355 per quintal respectively in comparison to 2021-22.
The Union Budget for 2022-23 has earmarked a sum of Rs. 2.37 Lakh Crore (33 Billion USD) for buying crops under the minimum support price from farmers. This initiative is estimated to benefit 16 Million Wheat and Paddy farmers in the country.