Wednesday, 8 April 2020

An Article on MSP(Minimum Support Price)

What is MSP?

MSP (Minimum Support Price) is a form of market invention by Indian Govt to insure the agriculture purchase. MSP is that price at which govt buys the farmers crop at minimum this cost. It is very important for Indian agriculture price policy. The minimum support prices (MSPs) to motivate the cultivators to adopt modern technology and raise productivity for the emerging demand patterns in the country.
MSP(Minimum Support Price)
MSP(Minimum Support Price)

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It is for the increase for increasing agricultural production and productivity for the growers because when they use modern technology and input but the outcome is less. All of these types of problems and the govt of India take a major step to put the best value of the product for growers and exporter. MSP every year is taking into account of major agriculture products and fixed by Govt commission.

What is Procurement Price?

It is a price when the Govt procure the crop for future or we can say that for Govt procure for buffer stock of grains, the seller may be producer or manufactured .  It usually higher than the MSP but lower than market price. Procurement of agriculture crops is made by FCI, state agency and cooperatives. 

How to Calculate MSP of Crop?

While calculating the MSP by CACP commission on various terms and reference. It is the structure of formulating the MSP of different commodities. 
  • Cost of Production
  • Changes in all inputs prices from previous year
  • Market Price Trends – domestics as well as international
  • Demand and Supply
  • Intercrop price parity
  • Agriculture and non agriculture terms of trade
  • Prices to be paid and prices received by the farmer
  • Cost of production and consumer cost

We know that cost of production is important for MSP but it is not only one factor which determins the MSP.


How MSP are finalized and Process Behind It.

Who Prepare MSP?

The Govt of India made a department for the farmers and crop analyzing for country. There is department basically which handles all the work on commodity prices and promotes the MSP and the department is Commission for Agricultural Costs and Prices (CACP). CACP has is an attached office of the Ministry of Agriculture and Farmers Welfare which came into extension in 1965.

How Many commodities are covered under MSP?

In the current status, CACP suggested MSPs of 24 commodities in which 7 kinds of cereal (Paddy, Wheat, Maize, Sorghum, Bajra, Barley, and Ragi), where 5 pulses (gram, tur, mung, lentil, and urad), 7 are oilseeds (mustard, soybean, groundnut,  sesamum, sunflower, safflower, nigerseed), and remaining  5 commercial crops like (copra, sugarcane, cotton, and raw jute, VFC  tobacco.

Commission for Agricultural Costs and Prices (CACP) Role in MSP?

CACP submits of Price Policy Reports every year to the government.  CACP suggestion has five groups of commodities namely Kharif crops, Rabi crops, Sugarcane, Raw Jute and Tobbaco, Copra. 

Before finalizing their report CACP prepare questioon for gathering information  and sends it to all the state governments and concerned National organizations and Ministries to put their views. 

CACP conducts separate meeting with state govt, FCI, NAFEED, Jute Corporation of India, Cotton Corporation of India(CCI), and different states farmers. Also conduct field visits to meet farmers, traders, and other at ground level to reviews the challenge and analyzing cost of production.  Based on all these all inputs, the Commission then finalizes its reports after that it will be submitted to the government.

Cabinet Committee on Economic Affairs (CCEA)

The Govt circulate the report to all state Govt and concerned central Ministries for their views and comment. When getting feedback from them, the Cabinet Committee on Economic Affairs (CCEA) of the Union government finalizes their decision on MSPs and also other recommendations made by CACP. 

When all the decisions are finalized CACP puts all its reports on the websites.


MSP of Rabi Crops finilized by the CCEA, Govt of India

This is based on CCEA report on Oct. 2019
MSP 2020-21 Rabi Season
MSP 2020-21



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